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 Units to be produced Quarter 5,200 2nd Quarter 8,200 3rd Quarter 7,209 4th Quarter 6,200 In addition, 6,200 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 $3,080. Each unit requires 8.20 grams of raw material that costs $1.60 per gram Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter's production needs. The desired ending inventory for the 4th quarter is 8,200 grams. Management plans to pay for 80% of raw material purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.40 direct labour hours and direct labourers are paid $11.10 per hour. Required: 1. Prepare the company's direct materials purchases budget and schedule of expected cash disbursements for materials for the upcoming fiscal year. Zan Corporation Direct Materials Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Required production in units of finished goods Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Total units of raw materials needed

Answer 1

Zan corporation
Direct materials budget
	1st quarter	2nd quarter	3rd quarter	4th quarter	year
Required production in units of finished goods	5,200	8,200	7,200	6,200	26,800
Units of raw materials needed per unit of finished goods	8.20	8.20	8.20	8.20	8.20
Units of raw materials needed to meet production	42,640	67,240	59,040	50,840	219,760
(+) desired ending inventory of raw materials [ 20% * Following quarter's production needs ]	13,448	11,808	10,168	8,200	8,200
Total units of raw materials needed	56,088	79,048	69,208	59,040	227,960
(-) Units of Beginning of raw materials inventory	6,200	13,448	11,808	10,168	6,200
Units of raw materials to be purchased	49,888	65,600	57,400	48,872	221,760
Unit cost of raw materials	$               1.60	$             1.60	$               1.60	$                  1.60	$                 1.60
Cost of raw materials to purchased	$          79,821	$      104,960	$          91,840	$             78,195	$          354,816

Schedule of expected cash disbursements for materials
	1st quarter	2nd quarter	3rd quarter	4th quarter	year
Beginning accounts payables	3080				$               3,080
1st quarter purchases	$          63,857	$         15,964			$             79,821
2nd quarter purchases		$         83,968	$          20,992		$          104,960
3rd quarter purchases			$          73,472	$             18,368	$             91,840
4th quarter purchases				$             62,556	$             62,556
Total cash disbursements for materials	$          66,937	$         99,932	$          94,464	$             80,924	$          342,257

Zan corporation
Direct labour budget
	1st quarter	2nd quarter	3rd quarter	4th quarter	year
Units to be produced	5,200	8,200	7,200	6,200	26,800
(*) Direct labor hours required per unit	0.40	0.40	0.40	0.40	0.40
Total direct labor hours required	2,080	3,280	2,880	2,480	10,720
(*) Direct labor rate per hour	$             11.10	$           11.10	$            11.10	$                11.10	$               11.10
Total direct labor cost	$          23,088	$         36,408	$          31,968	$             27,528	$          118,992