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.
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.
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Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.
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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.)
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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 |
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