Problem:

Becket industries manufactures a popular interactive stuffed animal for children that require three computer chips inside each toy. Beckett pays $2 for each computer chip. To help guard against stockouts of the computer chip, Beckett has a policy that states that the ending inventory of computer chips should be at least 20% of the following months production needs. The production needs for the first four months of the year are as follows: Jan= 5000 stuffed animals to be produced, Feb= 4400 stuffed animals to be produced, March= 4800 stuffed animals to be produced, April= 4200 stuffed animals to be produced.

Required:

Question: Prepare a direct materials budget for the first quarter that shows both the number of computer chips needed and the dollar amount of the of the purchases in the budget.

Note: Explain all steps comprehensively.