Question

The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: Units to be produced 1st Quarter 20,000 2nd Quarter 23,000 3rd Quarter 22,000 4th Quarter 21,000 In addition, 40.000 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 $7,800. Each unit requires 8 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 $11.50 per hour. Required: 1.&2. 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. 3. Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole. 4. Calculate the estimated direct labor cost for each quarter and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Req 4 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 Quarter 166,000 2nd Quarter 3rd Quarter 4th Quarter Year [ Estimated grams of raw material to be purchased Cost of raw materials to be purchased

Answer 1

Solution 1 & 2:

Direct Materials Budget - Zan Corporation
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Required production is units of finished goods	20000	23000	22000	21000	86000
Units of raw material needed per unit of finished goods	8	8	8	8	8
Units of raw materials needed to meet production	160000	184000	176000	168000	688000
Add: Budgeted ending inventory (25% of next quarter material requirements)	46000	44000	42000	5000	5000
Total units of raw materials needed	206000	228000	218000	173000	693000
Less: Beginning inventory	40000	46000	44000	42000	40000
Estimated grams of raw materials to be purchased	166000	182000	174000	131000	653000
Unit cost of raw materials	$1.80	$1.80	$1.80	$1.80	$1.80
Cost of raw materials to be purchased	$298,800.00	$327,600.00	$313,200.00	$235,800.00	$1,175,400.00

Solution 3:

Schedule of expected cash disbursements - Zan Corporation
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Beginning Accounts payable	$7,800.00				$7,800.00
1st quarter purchases	$179,280.00	$119,520.00			$119,520.00
2nd quarter purchases		$196,560.00	$131,040.00		$131,040.00
3rd quarter purchases			$187,920.00	$125,280.00	$125,280.00
4th quarter purchases				$141,480.00	$141,480.00
Total cash disbursements for materials	$187,080.00	$316,080.00	$318,960.00	$266,760.00	$1,088,880.00

Solution 4:

Direct Labor Budget - Zan Corporation
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Budgeted Production Units	20000	23000	22000	21000	86000
Direct labor hours per unit	0.4	0.4	0.4	0.4	0.4
Direct labor hour required	8000	9200	8800	8400	34400
Rate per direct labor hours	$11.50	$11.50	$11.50	$11.50	$11.50
Budgeted direct labor cost	$92,000.00	$105,800.00	$101,200.00	$96,600.00	$395,600.00