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	15,000	18,000	17,000	16,000

In addition, 30,000 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 $6,800.

Each unit requires 8 grams of raw material that costs $1.60 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 6,000 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 $11.50 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.)

  

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

  

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.)

Answer 1

1-a.	Zan Corporation
	Direct Materials Budget
		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
	Units to be produced	15000	18000	17000	16000	66000
	Raw material required per unit of production (grams)	8	8	8	8	8
	Raw material needed for production	120000	144000	136000	128000	528000
	Ending inventory @ 25% of following quarter's production needs	36000	34000	32000	6000	6000
	Total raw materials requirement (grams)	156000	178000	168000	134000	534000
	Less: Beginning inventory	30000	36000	34000	32000	30000
	Raw materials to be purchased (grams)	126000	142000	134000	102000	504000
	Unit cost of raw materials	$           1.60	$            1.60	$           1.60	$           1.60	$       1.60
	Budgeted raw material purchases $	201600	227200	214400	163200	806400
1-b.	Zan Corporation
	Schedule of Expected Cash Disbursements for Purchases of Materials
		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
	Disbursements for:
	Accounts payable	6800				6800
	1st Quarter purchases	120960	80640			201600
	2nd Quarter purchases		136320	90880		227200
	3rd Quarter purchases			128640	85760	214400
	4th Quarter purchases				97920	97920
	Total cash disbursements $	127760	216960	219520	183680	747920
2	Zan Corporation
	Direct Labor Budget
		1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
	Budgeted production (units)	15000	18000	17000	16000	66000
	Direct labor hours required per unit	0.20	0.20	0.20	0.20	0.20
	Total labor hours needed	3000	3600	3400	3200	13200
	Direct labor rate per hour	$        11.50	$          11.50	$         11.50	$         11.50	11.5
	Budgeted direct labor cost $	34500	41400	39100	36800	151800