Question

In: Accounting

The production department of Zan Corporation has submitted the following forecast of units to be produced...

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 14,000 17,000 16,000 15,000

In addition, 24,500 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 $6,600.

     Each unit requires 7 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 $15.50 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.)

rev: 11_13_2014_QC_59020

Solutions

Expert Solution

1-a.

Zan Corporation
Direct Materials Budget
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced 14000 17000 16000 15000 62000
Material required per unit (grams) 7 7 7 7 7
Material required for production (grams) 98000 119000 112000 105000 434000
Desired ending inventory of material as percent of following quarter's production needs 25% 25% 25% 25%
Ending inventory of material 29750 28000 26250 7000 7000
Total material required 127750 147000 138250 112000 441000
Less: Beginning inventory of material 24500 29750 28000 26250 24500
Quantity of material to be purchased (grams) 103250 117250 110250 85750 416500
Unit cost of raw material $ 1.40 1.40 1.40 1.40 1.40
Total budgeted material purchases $ 144550 164150 154350 120050 583100

1-b.

Zan Corporation
Schedule of Expected Cash Disbursements for Material Purchases
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Accounts payable 6600 6600
1st quarter purchases 86730 57820 144550
2nd quarter purchases 98490 65660 164150
3rd quarter purchases 92610 61740 154350
4th quarter purchases 72030 72030
Total expected cash disbursements $ 93330 156310 158270 61740 541680

2.

Zan Corporation
Direct Labor Budget
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced 14000 17000 16000 15000 62000
Direct labor hours required per unit 0.40 0.40 0.40 0.40 0.40
Total direct labor hours needed 5600 6800 6400 6000 24800
Direct labor rate per hour $ 15.50 15.50 15.50 15.50 15.50
Total budgeted direct labor cost $ 86800 105400 99200 93000 384400

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