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	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

Answer 1

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