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Question

The chip used in production of the calculator is sometimes hard to get, so it is necessary to carry large

inventories as a precaution against stock-outs. For this reason, the inventory of chips at the end of a quarter must be equal to 20% of the following quarter's production needs. A total of 55,000 chips will be on hand to start the first quarter of year 2.

 

Required: Make a direct materials purchases budget for chips, by quarter and in total, for year 2. At the bottom of your budget, show the dollar amount of purchases for each quarter and for the year in total.


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Top Answer

See the attached table. There's... View the full answer

calcs.png

First
Second
Third
Fourth
Year
Required production in calculators
79000
109000
169000
119000
476000
Number of chips per calculators
3
3
3
3
3
Production needs-chips
237000
327000
507000
357000...

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