The production department of ABC Company has submitted the following forecasts of units to be produced by quarter for the upcoming fiscal year: 10 quarter 2-1 quarter 3. quarter 40 quarter Units to be 6,000 7,000 8,000 5,000 produced In addition, the beginning mw materials inventory for the first quarter is budgeted to be 3600 pounds and the beginning accounts payable for the 1° quarter is budgeted to be $11,775. Each unit requires three pounds of raw materials that costs $2.5 per pound. Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter's production needs of raw materials. The desired ending inventory for the fourth quarter is 3700 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 workers are paid $12 per hour. Required 1. Prepare the Company's Direct Materials Purchase Budget by quarter and for the year. 2. Prepare the Cash disbursement schedule for materials by quarter and for the year. 3. If the company followed same cash payment policy in the last year, like the current year, how much was the total amount for credit purchase of inventory for the last quarter of the last year? 4. Construct the Company's direct labor budget for each quarter assuming that the direct labor work force is not adjusted each quarter. Instead assume that the Company's direct labor force consists of permanent employees who are guaranteed to be paid for at least 3000 hours of work each quarter. If the number of required direct labor hours is less than this number, the workers are paid for 3,000 hours anyway. Any hours worked in excess of 3000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The production department of ABC Company has submitted the following forecasts of units to be produced by quarter for the upcoming fiscal year: 10 quarter 2-1 quarter 3. quarter 40 quarter Units to be 6,000 7,000 8,000 5,000 produced In addition, the beginning mw materials inventory for the first quarter is budgeted to be 3600 pounds and the beginning accounts payable for the 1° quarter is budgeted to be $11,775. Each unit requires three pounds of raw materials that costs $2.5 per pound. Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter's production needs of raw materials. The desired ending inventory for the fourth quarter is 3700 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 workers are paid $12 per hour. Required 1. Prepare the Company's Direct Materials Purchase Budget by quarter and for the year. 2. Prepare the Cash disbursement schedule for materials by quarter and for the year. 3. If the company followed same cash payment policy in the last year, like the current year, how much was the total amount for credit purchase of inventory for the last quarter of the last year? 4. Construct the Company's direct labor budget for each quarter assuming that the direct labor work force is not adjusted each quarter. Instead assume that the Company's direct labor force consists of permanent employees who are guaranteed to be paid for at least 3000 hours of work each quarter. If the number of required direct labor hours is less than this number, the workers are paid for 3,000 hours anyway. Any hours worked in excess of 3000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.