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: 10 points 1st Quarter 24,000 2nd Quarter 27,000 3rd Quarter 26,000 4th Quarter 25,000 Units to be produced eBookIn addition, 42,000 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 $8,600. Print Each unit requires 7 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 $12.50 per hour. References 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

Explanation / Answer

Zan Corporation Direct Material Purchase Budget - Material Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Production 24000 27000 26000 25000 requirement per unit 7 7 7 7 Material needed for production 168000 189000 182000 175000 Budgeted ending inventory (25% of next months production) 47250 45500 43750 5000 Total material requirements 215250 234500 225750 180000 Budgeted begning inventory 42000 47250 45500 43750 Material to be purchased 173250 187250 180250 136250 Direct material cost per pound 1.8 1.8 1.8 1.8 Total budgeted direct material 311850 337050 324450 245250 Disbursements to accounts payables Quarter 1 Quarter 2 Quarter 3 Quarter 4 Regarding purchase of Quarter 4 (last year) 8600 Regarding purchase of Quarter 1 187110 124740 (311850*60%) (311850*40%) Regarding purchase of Quarter 2 202230 134820 (337050*60%) (337050*40%) Regarding purchase of Quarter 3 194670 129780 (324450*60%) (324450*40%) Regarding purchase of Quarter 4 147150 (245250*60%) Total collection 195710 326970 329490 276930 Zan Corporation Direct Labour Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Production 24000 27000 26000 25000 DL hours per hour 0.4 0.4 0.4 0.4 Total direct labour hours needed 9600 10800 10400 10000 Direct labour rate per hour 12.5 12.5 12.5 12.5 Total budgeted direct labour hour 120000 135000 130000 125000

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