Exercise 7-11 Direct Materials and Direct Labor Budgets [LO4, LO5]

The production department of Priston Company has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year.

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Units to be produced	11,000	12,000	13,000	10,000

In addition, the beginning raw materials inventory for the 1st Quarter is budgeted to be 4,400 pounds and the beginning accounts payable for the 1st Quarter is budgeted to be $20,900.

Each unit requires two pounds of raw material that costs $3.00 per pound. Management desires to end each quarter with a raw materials inventory equal to 20% of the following quarters production needs. The desired ending inventory for the 4th Quarter is 7,500 pounds. Management plans to pay for 70% of raw material purchases in the quarter acquired and 30% in the following quarter. Each unit requires 0.5 direct labor-hours and direct labor-hour workers are paid $14 per hour.

Required:
1a.	Prepare the companys direct materials budget for the upcoming fiscal year. (Input all amounts as positive values. Do not round intermediate calculations.)

Priston Company Direct Materials Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Production needs - pounds
(Click to select)DeductAdd: (Click to select)Beginning inventoryEnding inventory
Total needs - pounds
(Click to select)DeductAdd: (Click to select)Beginning inventoryEnding inventory
Raw materials to be purchased - pounds
Cost of raw materials to be purchased	$	$	$	$	$

1b.	Prepare a schedule of expected cash disbursements for purchases of materials for the upcoming fiscal year. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.)

Priston Company Schedule of Expected Cash Disbursements for Materials
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Accounts payable, beginning balance	$	$	$	$	$
1st Quarter purchases
2nd Quarter purchases
3rd Quarter purchases
4th Quarter purchases
Total cash disbursements for materials	$	$	$	$	$

2.	Complete 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.

Priston Company Direct Labor Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total direct labor-hours needed
Total direct labor cost	$	$	$	$	$