Problem:
Texas Products has developed a very powerful electronic calculator. Each calculator requires three small chips that cost $2.00 each and are purchased from an overseas supplier. Texas Products has prepared a production budget for the calculator by quarters for Year 2 and for the first quarter of Year 3, as follows:
|
Year 2
|
Year 3
|
| |
First
|
Second
|
Third
|
Fourth
|
First
|
|
Budgeted productions,
|
|
|
|
|
|
|
in Calculators
|
60,000
|
90,000
|
150,000
|
100,000
|
80,000
|
The inventory of the chips at the end of a quarter must be equal to 20% of the following quarter's production needs. There will be 36,000 chips on hand to start the first quarter of Year 2.
Required:
Prepare direct materials budget for the chips, by quarter and in total, for Year 2 including the dollar amount of purchases for each quarter and for the year in total.