Budgeted Labor, Materials, and Purchases}

Worldwide Fabricating Co. manufactures small parts from steel. Based on a sales forecast, the following production schedule has been established for its two products during four months of 20XX.

Each product is made from the same raw material, Type 4000 steel. Delivery time for the steel is such that it must be ordered one month in advance, in quantities which are multiples of \(10,000 \mathrm{lbs}\). Each product also passes through two operations, a lathe and a grinder. Historically the following costs have been incurred for one unit of each product.

\(1 / 4\) hour on grinder.
The beginning inventory of Type 4000 steel is \(42,400 \mathrm{lbs}\). The lathe requires one operator who is paid \(\$ 10\) per hour. The grinder uses one operator at \(\$ 5\) per hour. One operator is required for every 750 machine-hours worked during a month. Develop the following for Worldwide for July, August and September.

(a) Direct materials budget,

(b) Purchases budget,

(c) Direct labor budget, including proposed staffing levels for the lathe and grinder departments.

Transcribed Image Text:

Master Production Schedule (Units) July August September October Model 101 10,000 8,000 10,000 12,000 Model 102 5,600 6,000 5,400 5,900