In: Accounting
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 | 8,000 | 11,000 | 10,000 | 9,000 |
In addition, 12,000 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 $5,400.
Each unit requires 6 grams of raw material that costs $1.80 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 5,000 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. 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.
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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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1&2.
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | Year | |
Units to be produced | 8,000 | 11,000 | 10,000 | 9,000 | 38,000 |
Raw material per unit (grams) | 6 | 6 | 6 | 6 | 6 |
Raw material to be used in production | 48,000 | 66,000 | 60,000 | 54,000 | 228,000 |
Desired ending raw materials | 16,500 (66,000*25%) | 15,000 (60,000*25%) | 13,500 (54,000*25%) | 5,000 | 5,000 |
Beginning raw materials inventory | (12,000) | (16,500) | (15,000) | (13,500) | (12,000) |
Estimated grams of raw material to be purchased | 52,500 | 64,500 | 58,500 | 45,500 | 221,000 |
Cost per gram | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
Cost of raw materials to be purchased | 94,500 | 116,100 | 105,300 | 81,900 | 397,800 |
3.
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | year | |
Cost of raw materials to be purchased | 94,500 | 116,100 | 105,300 | 81,900 | 397,800 |
Paid in the quarter acquired | 56,700 (94,500*60%) | 69,660 (116,100*60%) | 63,180 (105,300*60%) | 49,140 (81,900*60%) | 238,680 |
Paid in the following quarter | 5,400 | 37,800 (94,500*40%) | 46,440 (116,100*40%) | 42,120 (105,300*40%) | 131,760 |
Total cash disbursements for materials | 62,100 | 107,460 | 109,620 | 91,260 | 370,440 |
4.
1st quarter | 2nd quarter | 3rd quarter | 4th quarter | Year | |
Units to be produced | 8,000 | 11,000 | 10,000 | 9,000 | 38,000 |
Direct labour hours per unit | 0.4 | 0.4 | 0.4 | 0.4 | 0.4 |
Total direct labour hours | 3,200 | 4,400 | 4,000 | 3,600 | 15,200 |
Direct labour rate per hour | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 |
Total direct labour cost | 46,400 | 63,800 | 58,000 | 52,200 | 220,400 |