The production department of Hareston Company has submitted the following foreca
ID: 2362894 • Letter: T
Question
The production department of Hareston Company has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Units to be produced……………… 7,000 8,000 6,000 5,000
Required:
1. Prepare the company’s direct materials budget and schedule of expected cash disbursements for purchases of materials for the upcoming fiscal years.
2. Prepare the company’s 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.
Explanation / Answer
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 6,000 7,000 8,000 5,000 Converted to pounds of raw materials: 18,000 21,000 24,000 15,000 1st Quarter 18,000 + (21,000 x 25% ) - 4,500 = 18,750 pounds of materials to be purchased 18,750 x $2 = $37,500 Cost of materials to be purchased 2nd Quarter 21,000 + (24,000 x 25%) - (21,000 x 25% ) = 21,750 pounds of materials to be purchased 21,750 x $2 = $43,500 Cost of materials to be purchased 3rd Quarter 24,000 + (15,000 x 25%) - (24,000 x 25% ) = 21,750 pounds of materials to be purchased 21,750 x $2 = $43,500 Cost of materials to be purchased 4th Quarter 15,000 + 3,750 - (15,000 x 25%) = 15,000 pounds of materials to be purchased. 15,000 x $2 = $30,000 Cost of materials to be purchased.
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