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	16,000	19,000	18,000	17,000

In addition, 16,000 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 $7,000.

Each unit requires 4 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 quarters 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 $12.50 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. 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.

Req 1 and 2 Req 3 Req 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 2nd 3rd 4th QuarterQuarter Q uarter Quarter Year Estimated grams of raw material to be purchased Cost of raw materials to be purchased Req 1 and 2 Req 3 > Req 1 and 2 Req 3 Req 4 Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole 1st 2nd 3rd 4th Year Quarter QuarterQuarter Quarter Total cash disbursements for materials Req 1 and 2 Req 4> Req 1 and 2 Req 3 Req 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. (Round "Direct labor-hours per unit" and "Direct labor cost per hour" answers to 2 decimal places.) 1st 2nd 3rd 4th Year Quarter Quarter QuarterQuarter Total direct labor cost