Question

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	9,000	12,000	11,000	10,000

In addition, 15,750 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 $5,600.

Each unit requires 7 grams of raw material that costs $1.20 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 8,000 grams. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.20 direct labor-hours and direct laborers are paid $15.50 per hour.

Required:

1-a. Prepare the company’s direct materials budget for the upcoming fiscal year. (Round "Unit cost of raw materials" answers to 2 decimal places.) Please also insert the year column after Quarter 4

Required production in units of finished goods	Quarter 1	Quarter 2	Quarter 3	Quarter4
Units of Raw Materials Needed to meet production
Units of Raw Materials needed per unit finished goods
Add desired Units of ending raw material
Total Units of raw material needed
?
Units of raw material to be purchased
Unit cost of raw material
Cost of raw material to be purchased

*The chart ends after cost of raw materials to be purchased*

1-b. Prepare a schedule of expected cash disbursements for purchases of materials for the upcoming fiscal year.

Beg. Balance Account Payable	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
1st Quarter Purchases
2nd Quarter Purchases
3rd Quarter Purchases
4th Quarter Purchases
Total cash disbursement

2. Prepare 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. (Round "Direct labor-hours per unit" and "Direct labor cost per hour" answers to 2 decimal places.) Please also add the year column next to it. Thank you!

Required Production in units	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Direct Labor Hours per unit
Total Direct Labor cost per hour
Direct Labor Cost per hour
Total Direct Labor Cost

Answer 1

Requirement 1 and 2
Direct Material Purchase Budget
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Units to be produced	9000	12000	11000	10000
Raw materials need per unit (gram)	7	7	7	7
Total Raw Material Neeed	63000	84000	77000	70000
Add: Ending Inventory (25% of production needs of following quarter)	21000	19250	17500	8000
Less: Beginning Inventory (Ending inventory of last quarter)	15750	21000	19250	17500
Raw Material to be Purchased ( Requirement-1)	68250	82250	75250	60500
Cost of raw material per gram	$1.20	$1.20	$1.20	$1.20
Cost of raw materials to be purchased (requirement 2)	$81,900.00	$98,700.00	$90,300.00	$72,600.00	$3,43,500.00

Requirement 3 – Total Cash Disbursement for materials
Expected Cash disbursement for purchases of materials
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Cost of raw materials to be purchased	$81,900.00	$98,700.00	$90,300.00	$72,600.00
Cash Disbursement for Raw materials:
60% in Current Qtr and 40% following quarter of purchase
Quarter-1 Purchase	$49,140.00	$32,760.00
Quarter-2 Purchase		$59,220.00	$39,480.00
Quarter 3 Purchase			$54,180.00	$36,120.00
Quarter-4 Purchase				$43,560.00
Beginning Account payable	$5,600.00
Total Cash Disbursement	$54,740.00	$91,980.00	$93,660.00	$79,680.00	$3,20,060.00

Requirement 4 --- Direct Labor Cost
Estimated Direct Labor Cost
	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Units to be produced	9000	12000	11000	10000
Direct labor hours needed per unit	0.2	0.2	0.2	0.2
Total Direct labor hours required for production	1800	2400	2200	2000
Direct labor Cost per hour	$15.50	$15.50	$15.50	$15.50
Total Direct labor cost	$27,900.00	$37,200.00	$34,100.00	$31,000.00	$1,30,200.00

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