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 6,000 9,000 8,000 7,000 In addition, 6,000 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 $5,000. Each unit requires 4 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 $12.50 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.

Answer 1

					Zan Corporation
					Direct Materials Budget
					1st	2nd	3rd	4th	Year
					Qtr	Qtr	Qtr	Qtr
Required production in units of finished goods					6,000	9,000	8,000	7,000	30,000
unit of raw materials needed per unit of finished					4	4	4	4	4
units of raw materials needed to meet prodcution					24000	36000	32000	28000	120000
Add:Desired units of ending raw materials inventory					9000	8000	7000	7,000	7,000
total units of raw materials needed					33000	44000	39000	35000	127000
less:units of beginning raw materials inventory					6,000	9000	8000	7000	6,000
units of raw materials to be purchased					27,000	35000	31000	28000	121,000
units cost of raw materials					1.4	1.4	1.4	1.4	1.4
Cost of raw materials to be purchased					37800	49000	43400	39200	169400
Estimated grams of raw material to be purchased					27,000	35000	31000	28000	121,000
cost of raw materials to be prucased					37800	49000	43400	39200	169400
	total cash disbursement for materails
					1st	2nd	3rd	4th	Year
					Qtr	Qtr	Qtr	Qtr
	Accounts payable				5,000				5,000
	first (37800*60%;40%)				22680	15120			37800
	second (49000*60%;40%)					29400	19600		49000
	third (43400*60%;40%)						26040	17360	43400
	foruth (39200*60%)							23520	23520
	total cash disbursement for materials				27,680	44520	45640	40880	158,720	answer
	total direct labor cost
					1st	2nd	3rd	4th	Year
					Qtr	Qtr	Qtr	Qtr
	units produced				6,000	9,000	8,000	7,000	30,000
	direct labor hours per unit required				0.4	0.4	0.4	0.4	0.4
	total direct labor hours required				2400	3600	3200	2800	12000
	cost per direct labor hour				12.5	12.5	12.5	12.5	12.5
	total direct labor cost				30000	45000	40000	35000	150000	answer