Question

# The production department of Zan Corporation has submitted the following forecast of units to be produced...

The production department of Zan Corporation 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 18,000 21,000 20,000 19,000

In addition, 27,000 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 \$7,400.

Each unit requires 6 grams of raw material that costs \$1.40 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 7,000 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 \$14.50 per hour.

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.

• Req 1 and 2
• Req 3
• Req 4

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 2nd 3rd 4th Quarter Quarter Quarter 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 2nd 3rd 4th Quarter Quarter Quarter Quarter Year Total cash disbursements for materials

Calculate the estimated direct labor cost for each quarter and for the year as a whole. (Round "Direct labor-hours per unit" and "Direct labor cost per hour" answers to 2 decimal places.)

 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year Total direct labor cost

Solutions:

 Zan Corporation Direct Materials Budget 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year Required production in units of finished goods 18000 21000 20000 19000 78000 Units of raw materials needed per unit of finished goods 6 6 6 6 6 Units of raw materials needed to meet production 108000 126000 120000 114000 468000 Add: Desired Ending Raw Material inventory (25% of next Quarter production needs) 31500 30000 28500 7000 7000 Total units of raw materials needed 139500 156000 148500 121000 475000 Less: Beginning Raw Material inventory 27000 31500 30000 28500 27000 Units of raw materials to be purchased 112500 124500 118500 92500 448000 Unit cost of raw materials \$1.40 \$1.40 \$1.40 \$1.40 \$1.40 Cost of raw materials to be purchased \$1,57,500 \$1,74,300 \$1,65,900 \$1,29,500 \$6,27,200 Zan Corporation Schedule of Expected Cash Disbursements for Materials 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year Beginning accounts payable \$7,400 \$7,400 1st Quarter purchases \$94,500 \$63,000 \$1,57,500 2nd Quarter purchases \$1,04,580 \$69,720 \$1,74,300 3rd Quarter purchases \$99,540 \$66,360 \$1,65,900 4th Quarter purchases \$77,700 \$77,700 Total cash disbursements for materials \$1,01,900 \$1,67,580 \$1,69,260 \$1,44,060 \$5,82,800 Zan Corporation Direct Labor Budget 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Year Required production in units 18000 21000 20000 19000 78000 Direct labor-hours per unit 0.40 0.40 0.40 0.40 0.40 Total direct labor-hours needed 7200 8400 8000 7600 31200 Direct labor cost per hour \$14.50 \$14.50 \$14.50 \$14.50 \$14.50 Total direct labor cost \$1,04,400 \$1,21,800 \$1,16,000 \$1,10,200 \$4,52,400

#### Earn Coins

Coins can be redeemed for fabulous gifts.