Exercise 8-16 (Algo) Direct Materials and Direct Labor Budgets[LO8-4, LO8-5]

The production department of Zan Corporation has submitted thefollowing forecast of units to be produced by quarter for theupcoming fiscal year:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Units to be produced	7,000	10,000	9,000	8,000

In addition, 8,750 grams of raw materials inventory is on handat the start of the 1st Quarter and the beginning accounts payablefor the 1st Quarter is $5,200.

Each unit requires 5 grams of raw material that costs $1.60 pergram. Management desires to end each quarter with an inventory ofraw materials equal to 25% of the following quarter’s productionneeds. The desired ending inventory for the 4th Quarter is 6,000grams. Management plans to pay for 60% of raw material purchases inthe quarter acquired and 40% in the following quarter. Each unitrequires 0.20 direct labor-hours and direct laborers are paid$13.50 per hour.

Required:

1.&2. Calculate the estimated grams of raw material thatneed to be purchased and the cost of raw material purchases foreach quarter and for the year as a whole.

3. Calculate the expected cash disbursements for purchases ofmaterials for each quarter and for the year as a whole.

4. Calculate the estimated direct labor cost for each quarterand for the year as a whole.