Beckett Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. The company pays $ 3 for each computer chip. To help to guard against stockouts of the computer chip, Beckett Industries has a policy that states that the ending inventory of computer chips should be at least 25% of the following month’s production needs. The production schedule for the first four months of the year is as follows:

Stuffed animals to be produced

January.............................................................................. 5,600

February............................................................................ 4,200

March................................................................................ 4,800

April................................................................................... 4,500

Requirement

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