Question

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: Units to be produced 1st Quarter 20,000 2nd Quarter 23,000 3rd Quarter 22,000 4th Quarter 21,000 In addition, 40,000 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 $7,800. Each unit requires 8 grams of raw material that costs $1.80 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 5,000 grams. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.40 direct labor-hours and direct laborers are paid $11.50 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. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Reg 4 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. - 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Estimated grams of raw material to be purchased Cost of raw materials to be purchased < Req 1 and 2 Req3 >

Answer 1

Each Unit requires 8 grams os raw material
Cost per gram is $ 1.8
Cost of raw materails per unit(8*1.8)	14.4
Opening stock of raw materail	40,000 Grams
		!st Quarter	2nd Quarter	3rdQuarter	4th Quarter
Units to be produced		20,000	23,000	22,000	21,000
Closing stock(25% of next quarter production)		5,000	5,500	5,250	5,000
Raw materials required for production(No. Of units produced*8)		160000	184000	176000	168000
Opening Stock		40000	5,000	5,500	5,250
Questions 1 &2)		!st Quarter	2nd Quarter	3rdQuarter	4th Quarter	Total for Year
Estimated grams of raw materials to be purchased (Purchases=RM used in production+closing sock-Opening stock		125,000	184,500	175,750	167,750	653,000
Cost of raw materials to be purchased		225000	332100	316350	301950	1,175,400
Question 3)		!st Quarter	2nd Quarter	3rdQuarter	4th Quarter	Total for Year
Cash Payments (60% of Current quarter+40% of previous quarter purcheses)		135000	289260	322650	307710	1054620
Question 4)		!st Quarter	2nd Quarter	3rdQuarter	4th Quarter	Total for Year
Units to be produced		20,000	23,000	22,000	21,000
Direct labour hours(No. of units produced*o.4 labor hrs per unit)		8,000.00	9,200.00	8,800.00	8,400.00
Estimated Direct labour cost(No. of hrs*11.5 per hr)		92000	105800	101200	96600	395600