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 13,000 2nd Quarter 16,Bee 3rd Quarter 15, eee 15, eee 4th Quarter 14,689 Units to be produced In addition, 19,500 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 $6,400. Each unit requires 6 grams of raw material that costs $120 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 8.000 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 $14.50 per hour. Required: 1.82. 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. Assume that the direct labor workforces adjusted each cuarter to match the number of hours required to produce the estimated number of units produced

Answer 1

Solution Required 1 & 2 Estimated grams of raw materials to be purchased (WN-1) Cost of raw material to be purchased (WN-1) 1st Quarter 82,500 $99,000 2nd Quarter 94,500 $113,400 3rd Quarter 88,500 $ 106,200 4th Quarter 71,000 $85,200 Year 336,500 $403,800 WN-1 1st Quarter 13,000 2nd Quarter 16,000 3rd Quarter 15,000 4th Quarter 14,000 Year 58,000 6 (a) Units to be produced (b) Grams of material required per unit (c) Grams of material required for production (a x b) (d) Desired ending inventory of raw material (e) Total needs (c+d) (f) Likely beginning inventory of raw material (e) Estimated grams of raw materials to be purchased (e-f) (h) Cost of Raw material per gram (0) Cost of raw material to be purchased (g x h) 78,000 24,000 102,000 19,500 82,500 $1.20 $99,000 96,000 22,500 118,500 24,000 94,500 $1.20 $113,400 90,000 21,000 111,000 22,500 88,500 $1.201 $106,200 84,000 8,000 92,000 21,000 7 1,000 $1.20 $85,200 348,000 8,000 356,000 19,500 $1.20 $403,800 Required 3 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year $6,400 $59,400 Cash paid for: - Beginning Accounts Payable - 1st Quarter purchase - 2nd Quarter purchase - 3rd Quarter purchase - 4th Quarter purchase Total cash disbursements for materials $39,600 $68,040 $45,360 $63,720 $6,400 $99,000 $113,400 $106,200 $51,120 $376,120 $42,480 $51,120 $93,600 $65,800 $107,640 $109,080 Required 4 (a) Units to be produced (b) Direct labor hours required per unit (c) Total direct labor hours required for production (axb) (d) Direct labor rate per hour (e) Total direct labor cost (cxd) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 13,000 16,000 15,000 14,000 0.201 0.201 0.201 0.20 2,600 3,200 3,000 2,800 $14.50 $14.50 $14.50 $14.50 $37,700 $46,400 $43,500 $40,600 Year 58,000 0.20 11,600 $14.50 $168,200