In: Accounting
Exercise 8-16 Direct Materials and Direct Labor Budgets [LO8-4, LO8-5]
The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
Units to be produced | 7,000 | 10,000 | 9,000 | 8,000 |
In addition, 8,750 grams of raw materials inventory is on hand at the start of the 1st Quarter and the beginning accounts payable for the 1st Quarter is $5,200.
Each unit requires 5 grams of raw material that costs $1.60 per gram. Management desires to end each quarter with an inventory of raw materials equal to 25% of the following quarter’s production needs. The desired ending inventory for the 4th Quarter is 6,000 grams. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.20 direct labor-hours and direct laborers are paid $13.50 per hour.
Required:
1.&2. Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchases for each quarter and for the year as a whole.
3. Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.
4. Calculate the estimated direct labor cost for each quarter and for the year as a whole.
1. 2 Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchases for each quarter and for the year as a whole.
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3. Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.
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4. Calculate the estimated direct labor cost for each quarter and for the year as a whole. (Round "Direct labor-hours per unit" and "Direct labor cost per hour" answers to 2 decimal places.)
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