Materials Purchases, Production, and Inventory Budgets. The purchasing agent and the cost accountant of Animations, Inc. are trying to solve the problem of scheduling purchases in connection with a planned expansion in the production of rocking horses. All lumber used is procured in a standard size, of which the following amounts, which include a due allowance for waste, are used in one complete rocking horse:
Oak – 2 board feet Pine – 5 board feet Maple – 10 board feet
A sales budget has been approved, and the following production schedule has been drawn up for 19A:
Quarter
1 st
2d
3d
4th
Rocking Horses
75
150
175
200
The production schedule for the first quarter of 19B calls for approximately
220 rocking horses.
Delivery of lumber is slow and uncertain; but by ordering early, delivery can be assured during the quarter desired. Lumber must be purchased in quantities that are multiples of 300 board feet of each kind of lumber; but since there is a very good discount for purchases of 1,500 board feet lots for all kinds of lumber combined, such purchases are made whenever possible. Otherwise, the minimum requirements are always purchased. In determining minimum requirements, it is necessary to have on hand at the beginning of a quarter sufficient materials to take care of production for that quarter.
Purchases of 1,500 board feet lots are restricted because of limited storage facilities. At the present time there is sufficient space to store 3,000 board feet of all types of lumber combined. During the early part of the year it is antici- pated that a new shed will be constructed to store an additional 1,200 board feet. It is expected that the total storage space of 4,200 board feet will be available prior to the end of the second quarter.
Inventory of lumber on January 1, 19A is as follows:
Oak – 150 board feet Pine – 600 board feet Maple – 900 board feet
Required: Schedule, or schedules, indicating the materials production re- quirements, materials purchases, and materials inventories for each type of lumber, by quarter, expressed in board feet.