Hoffman Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. The company pays $1 for each computer chip. To help to guard against stockouts of the computer chip, Hoffman Industries has a policy that states that the ending inventory of computer chips should be at least 30% 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. . . . 4,100 March. . . . . 4,900 April. . . . . . . 4,800 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. Prepare the direct materials budget by first calculating the total quantity needed, then complete the budget. Hoffman Industries Direct Materials Budget For the Months of January through March January February March Quarter Units to be produced ? ? ? ? Multiply by: Quantity of direct materials needed per unit ? ? ? ? Quantity needed for production ? ? ? ? Plus: Desired ending inventory of direct materials ? ? ? ? Total quantity needed ? ? ? ?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

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Hoffman Industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. The company pays $1 for each computer chip. To help to guard against stockouts of the computer chip, Hoffman Industries has a policy that states that the ending inventory of computer chips should be at least 30% 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. . . .	4,100
March. . . . .	4,900
April. . . . . . .	4,800

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.

Prepare the direct materials budget by first calculating the total quantity needed, then complete the budget.



Hoffman Industries Direct Materials Budget For the Months of January through March
	January	February	March	Quarter
Units to be produced	?	?	?	?
Multiply by: Quantity of direct materials needed per unit	?	?	?	?
Quantity needed for production	?	?	?	?
Plus: Desired ending inventory of direct materials	?	?	?	?
Total quantity needed	?	?	?	?

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