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	5,000	8,000	7,000	6,000

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 $2,880.

Each unit requires 8 grams of raw material that costs $1.20 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 8,000 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.

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.

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

Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.

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

Calculate the estimated direct labor cost for each quarter and for the year as a whole.

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

Answer 1

Solution

Zan Corporation
Direct Amaterial Budget
	Quarter
	First	Second	Third	Forth	Year
Units of raw material to be purchased	50000	62000	54000	44000	210000
Cost of raw material to be purchased	$        60,000.00	$    74,400.00	$         64,800.00	$        52,800.00	$       252,000.00

.

Zan Corporation
Cash disbursement budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total cash disbursenemt	$        38,880.00	$    68,640.00	$         68,640.00	$        57,600.00	$       233,760.00

.

Direct labor Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total direct labor coct	$        11,500.00	$    18,400.00	$         16,100.00	$        13,800.00	$         59,800.00

Working

Direct labor Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Required Production in Units	5000	8000	7000	6000	26000
Direct labor time per unit (Hours)	0.2	0.2	0.2	0.2	0.2
Total direct labor hours needed	1000	1600	1400	1200	5200
Direct labor cost per hout	$                11.50	$            11.50	$                 11.50	$                11.50	$                 11.50
Total direct labor coct	$        11,500.00	$    18,400.00	$         16,100.00	$        13,800.00	$         59,800.00

.

Zan Corporation
Direct Amaterial Budget
	Quarter
	First	Second	Third	Forth	Year
Required production of Units of finished goods	5000	8000	7000	6000	26000
Units of Raw material neede per unit of finoisged goods	8	8	8	8	8
Units of raw material needed to meet production	40000	64000	56000	48000	208000
Budgeted Ending Inventory (Grams)	16000	14000	12000	8000	8000
Total Units of raw material needed	56000	78000	68000	56000	216000
Beginning Inventory (Grams)	6000	16000	14000	12000	6000
Units of raw material to be purchased	50000	62000	54000	44000	210000
Unit cost of raw material	$                  1.20	$               1.20	$                   1.20	$                   1.20	$                    1.20
Cost of raw material to be purchased	$        60,000.00	$    74,400.00	$         64,800.00	$        52,800.00	$       252,000.00

.

Zan Corporation
Cash disbursement budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total Material purchase cost	$        60,000.00	$    74,400.00	$         64,800.00	$        52,800.00	$       252,000.00
Paid in Current Quarter	$        36,000.00	$    44,640.00	$         38,880.00	$        31,680.00	$       151,200.00
Paid for previous quarter	$          2,880.00	$    24,000.00	$         29,760.00	$        25,920.00	$         82,560.00
Total cash disbursenemt	$        38,880.00	$    68,640.00	$         68,640.00	$        57,600.00	$       233,760.00