Gable Industries manufactures a popular interactive stuffed animal for children that re-quires two computer chips inside each toy. The company pays $ 1 for each computer chip. To help to guard against stockouts of the computer chip, Gable Industries has a policy that states that the ending inventory of computer chips should be at least 20% 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.............................................................................. 5,300
February............................................................................ 4,100
March................................................................................ 4,200
April................................................................................... 4,600

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.