Exercise 8-16 (Algo) Direct Materials and Direct Labor Budgets[LO8-4, LO8-5]
The production department of Zan Corporation has submitted thefollowing forecast of units to be produced by quarter for theupcoming 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 handat the start of the 1st Quarter and the beginning accounts payablefor the 1st Quarter is $5,200.
Each unit requires 5 grams of raw material that costs $1.60 pergram. Management desires to end each quarter with an inventory ofraw materials equal to 25% of the following quarter’s productionneeds. The desired ending inventory for the 4th Quarter is 6,000grams. Management plans to pay for 60% of raw material purchases inthe quarter acquired and 40% in the following quarter. Each unitrequires 0.20 direct labor-hours and direct laborers are paid$13.50 per hour.
Required:
1.&2. Calculate the estimated grams of raw material thatneed to be purchased and the cost of raw material purchases foreach quarter and for the year as a whole.
3. Calculate the expected cash disbursements for purchases ofmaterials for each quarter and for the year as a whole.
4. Calculate the estimated direct labor cost for each quarterand for the year as a whole.
