Problem 10-18

Source: Managerial Accounting, Asia Global Edition, 2e

The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year.

Units Produced:

Ist Quarter: 5000

2^nd Quarter: 8000

3^rd Quarter: 7000

4^th Quarter: 6000

In addition, the beginning raw materials inventory for the 1^st quarter is budgeted to be 6,000 grams and the beginning accounts payable for the 1^st quarter is budgeted to be $ 2,880.

Each unit requires 8 grams of raw materials that costs $1.20 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 4^th Quarter is 8,000 grams. Management plans to pay for 60% of raw materials purchases in the quarter acquired and 40% in the following quarter. Each unit requires .20 direct labor hours and direct laborers are paid $ 11.50 per hour.

Required:

Prepare the companys direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted numbers of units produced.