Exercise 8-16 Direct Materials and Direct Labor Budgets [LO8-4, LO8-5] The produ

Question

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: Units to be produced 1st Quarter 20,000 2nd Quarter 23,000 3rd Quarter 22,000 4th Quarter 21,000 In addition, 40,000 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 $7.800. Each unit requires 8 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 quarter's 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 $11.50 per hour. 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 Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Estimated grams of raw material to be purchased Cost of raw materials to be purchased Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total cash disbursements for materials 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 Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total direct labor cost

Explanation / Answer

Direct Materials Budget 1st 2nd 3rd 4th Year Qtr Qtr Qtr Qtr Required production in units of finished goods 20,000 23,000 22,000 21,000 86,000 unit of raw materials needed per unit of finished 8 8 8 8 8 units of raw materials needed to meet prodcution 160000 184000 176000 168000 688000 Add:Desired units of ending raw materials inventory 46000 44000 42000 5,000 5,000 total units of raw materials needed 206000 228000 218000 173000 693000 less:units of beginning raw materials inventory 40,000 46000 44000 42000 40,000 units of raw materials to be purchased 166,000 182000 174000 131000 653,000 units cost of raw materials 1.8 1.8 1.8 1.8 1.8 Cost of raw materials to be purchased 298800 327600 313200 235800 1175400 Estimated grams of raw material to be purchased 166,000 182000 174000 131000 653,000 cost of raw materials to be prucased 298800 327600 313200 235800 1175400 total cash disbursement for materails 1st 2nd 3rd 4th Year Qtr Qtr Qtr Qtr Accounts payable 7,800 7,800 first (298,800*60%;40%) 179280 119520 298800 second (327600*60%;40%) 196560 131040 327600 third (313200*60%;40%) 187920 125280 313200 foruth (235800*60%) 141480 141480 total cash disbursement for materials 187,080 316080 318960 266760 1,088,880 answer total direct labor cost 1st 2nd 3rd 4th Year Qtr Qtr Qtr Qtr units produced 20,000 23,000 22,000 21,000 86,000 direct labor hours per unit required 0.4 0.4 0.4 0.4 0.4 total direct labor hours required 8000 9200 8800 8400 34400 cost per direct labor hour 11.5 11.5 11.5 11.5 11.5 total direct labor cost 92000 105800 101200 96600 395600 answer

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