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Micro Products Inc. has developed a very powerful electronic calculator. Each calculator requires three sma chips that cost $3 each and are purchased from an overseas supplier. Micro Products has prepared a production budget for the calculator by quarters for year 2 and for the first quarter of year 3. as shown below: First Year 2 Second Third 106,000 166,000 Year 3 First 96,000 Fourth 116,000 Budgeted production, in calculators 76,000 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 15% of the following quarter's production needs. A total of 52,000 chips will be on hand to start the first quarter of year 2. Required: Prepare 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. Micro Products, Inc. Direct Materials Budget - Year 2 Quarter First Second Third Fourth Year Required production in calculators 76,000 106,000 166,000 116,000 464,000 Number of chips per 3 3 3 3 3 calculator Production needs-chips 228,000 318,000 498,000 348,000 1,392,00 Add: Ending inventory Total needs 228,000 318,000 498,000 348,000 1,392,00 Deduct: Beginning inventory Required purchases- chips Total cost of purchases

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