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	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-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

1a:

Zan Corporation
Direct Materials Budget
	1st	2nd	3rd	4th
	Quarter	Quarter	Quarter	Quarter	Year
Required production in units of finished goods	8000	11000	10000	9000	38000
Units of raw materials needed per unit of finished goods	6	6	6	6	6
Units of raw materials needed to meet production	48000	66000	60000	54000	228000
Add: Desired Ending Raw Material inventory (25% of next Quarter production needs)	16500	15000	13500	5000	5000
Total units of raw materials needed	64500	81000	73500	59000	233000
Less: Beginning Raw Material inventory	12000	16500	15000	13500	12000
Units of raw materials to be purchased	52500	64500	58500	45500	221000
Unit cost of raw materials	$1.80	$1.80	$1.80	$1.80	$1.80
Cost of raw materials to be purchased	$94,500	$1,16,100	$1,05,300	$81,900	$3,97,800

1b:

Zan Corporation
Schedule of Expected Cash Disbursements for Materials
	1st	2nd	3rd	4th
	Quarter	Quarter	Quarter	Quarter	Year
Beginning accounts payable	$5,400				$5,400
1st Quarter purchases	$56,700	$37,800			$94,500
2nd Quarter purchases		$69,660	$46,440		$1,16,100
3rd Quarter purchases			$63,180	$42,120	$1,05,300
4th Quarter purchases				$49,140	$49,140
Total cash disbursements for materials	$62,100	$1,07,460	$1,09,620	$91,260	$3,70,440

2.

Zan Corporation
Direct Labor Budget
	1st	2nd	3rd	4th
	Quarter	Quarter	Quarter	Quarter	Year
Required production in units	8000	11000	10000	9000	38000
Direct labor-hours per unit	0.40	0.40	0.40	0.40	0.40
Total direct labor-hours needed	3200	4400	4000	3600	15200
Direct labor cost per hour	$14.50	$14.50	$14.50	$14.50
Total direct labor cost	$46,400	$63,800	$58,000	$52,200	$2,20,400