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	14,000	17,000	16,000	15,000

In addition, 24,500 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 $6,600.

Each unit requires 7 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 $15.50 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. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced.

1 and 2:

	1st	2nd	3rd	4th
	Quarter	Quarter	Quarter	Quarter	Year
Estimated grams of raw material to be purchased
Cost of raw materials to be purchased

3:

	1st	2nd	3rd	4th
	Quarter	Quarter	Quarter	Quarter	Year
Total cash disbursements for materials

4: round to 2 decimal places

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

Answer 1

					Zan Corporation
					Direct Materials Budget
					1st	2nd	3rd	4th	Year
					Qtr	Qtr	Qtr	Qtr
Required production in units of finished goods					14,000	17,000	16,000	15,000	62,000
unit of raw materials needed per unit of finished					7	7	7	7	7
units of raw materials needed to meet prodcution					98000	119000	112000	105000	434000
Add:Desired units of ending raw materials inventory					29750	28000	26250	7,000	7,000
total units of raw materials needed					127750	147000	138250	112000	441000
less:units of beginning raw materials inventory					24,500	29750	28000	26250	24,500
units of raw materials to be purchased					103,250	117250	110250	85750	416,500
units cost of raw materials					1.4	1.4	1.4	1.4	1.4
Cost of raw materials to be purchased					144550	164150	154350	120050	583100
Estimated grams of raw material to be purchased					103,250	117250	110250	85750	416,500
cost of raw materials to be prucased					144550	164150	154350	120050	583100
	total cash disbursement for materails
					1st	2nd	3rd	4th	Year
					Qtr	Qtr	Qtr	Qtr
	Accounts payable				6,600				6,600
	first (144,550*60%;40%)				86730	57820			144550
	second (164,150*60%;40%)					98490	65660		164150
	third (154,350*60%;40%)						92610	61740	154350
	foruth (120,050*60%)							72030	72030
	total cash disbursement for materials				93,330	156310	158270	133770	541,680	answer
	total direct labor cost
					1st	2nd	3rd	4th	Year
					Qtr	Qtr	Qtr	Qtr
	units produced				14,000	17,000	16,000	15,000	62,000
	direct labor hours per unit required				0.4	0.4	0.4	0.4	0.4
	total direct labor hours required				5600	6800	6400	6000	24800
	cost per direct labor hour				15.5	15.5	15.5	15.5	15.5
	total direct labor cost				86800	105400	99200	93000	384400	answer