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 1st Quarter ze, a its to be produced 2nd Quarter 23,888 3rd Quarter 22, eee 4th Quarter 21,800 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: 182 Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchases for each 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. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced Complete this question by entering your answers in the tabs below. Res and 2 Rea 3 Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchase for each quarter and for the year as a whole 2nd 3rd E th Quarter Quarter Quarter Quarter

Answer 1

Req 1 and 2 :
	1st quarter	2nd quarter	3rd quarter	4th quarter	year
Units to be produced	20,000	23,000	22,000	21,000	86,000
Quantity of raw materials needed per unit of finished goods	8	8	8	8	8
Quantity of raw materials needed to meet production	160,000	184,000	176,000	168,000	688,000
(+) desired ending inventory of raw materials [ 25% * Following quarter's production needs ]	46,000	44,000	42,000	5,000	5,000
Total units of raw materials needed	206,000	228,000	218,000	173,000	693,000
(-) Beginning inventory of raw materials	40,000	46,000	44,000	42,000	40,000
Estimated grams of raw material to be purchased	166,000	182,000	174,000	131,000	653,000
Cost per gram of raw materials	$               1.80	$             1.80	$               1.80	$          1.80	$                 1.80
Cost of raw materials to purchased	$        298,800	$      327,600	$        313,200	$   235,800	$       1,175,400

Req 3 :
	1st quarter	2nd quarter	3rd quarter	4th quarter	year
Cash disbursement for purchases of :
Current quarter (60%)	$        179,280	$      196,560	$        187,920	$   141,480
Previous quarter (40%)	$             7,800	$      119,520	$        131,040	$   125,280
Total cash disbursement for materials	$        187,080	$      316,080	$        318,960	$   266,760	$       1,088,880

Req 4 :
	1st quarter	2nd quarter	3rd quarter	4th quarter	year
Units to be produced	20,000	23,000	22,000	21,000	86,000
(*) Direct labor hours required per unit	0.40	0.40	0.40	0.40	0.40
Total direct labor hours required	8,000	9,200	8,800	8,400	34,400
(*) Direct labor rate per hour	$             11.50	$           11.50	$            11.50	$        11.50	$               11.50
Total direct labor cost	$          92,000	$      105,800	$        101,200	$      96,600	$          395,600