Problem 9-12 Direct Materials and Direct Labor Budgets

The production department of Prison Company 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	6,000	7,000	8,000	5,000

In addition, the beginning raw materials inventory for the 1^st Quarter is budgeted to be 3,600 pounds and the beginning accounts payable for the 1^st Quarter is budgeted to be $11,775.

Each unit requires three pounds of raw material that costs $2.50 per pound. Management desires to end each quarter with a raw materials inventory equal to 20% of the following quarters production needs. The desired ending inventory for the 4^th Quarteris 3,700 pounds. Management plans to pay for 70% of raw material purchases in the quarter acquired and 30% in the following quarter. Each unit requires 0.50 direct labor-hours and direct labor-hour workers are paid $12 per hour.

Required:

1. Prepare the companys direct materials budget and schedule of expected cash disbursements for materials for the upcoming fiscal year.
2. 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 number of units produced.