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 5,000 2nd Quarter 8,888 3rd Quarter 7.ee Units to be produced 4th Quarter 6, eee 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 & 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. Required: 1.82 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. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Rey 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 2nd Quarter 3rd Quarter 4th Quarter Year Estimated grams of raw material to be purchased Cost of raw materials to be purchased $ 60,000 $ 74,400 $ 64,800 $ 52,800 $ 252.000 Reg 1 and 2 Req3 >

Answer 1

Required 1 and 2 )

	1	2	3	4
	Quarter	Quarter	Quarter	Quarter	Year
Units to be produced	5,000	8,000	7,000	6,000	26,000
Raw materials required per unit	8	8	8	8	8
Total Raw materials needed for production	40,000	64,000	56,000	48,000	208,000
Add: Ending raw material	16.000	14,000	12,000	8,000	8,000
Less;Begining Raw material inventory	6,000	16,000	14,000	12,000	6,000
Estimated grams of raw material to be purchased	50,000	62,000	54,000	44,000	210,000
Cost per gram	$1.20	$1.20	$1.20	$1.20	$1.20
Cost of raw materials to be purchased	$60,000	$74,400	$64,800	$52,800	$252,000

Workings :

Ending Raw Material    Begining Raw Material

Quarter 1 (64,000*25%) = 16,000 6,000 (given)

Quarter 2 (56,000*25%) = 14,000 (64,000*25%) = 16,000

Quarter 3 (48,000*25%) = 12,000 (56,000*25%) = 14,000

Quarter 4 8,000 (given) (48,000*25%) = 12,000

Required 3)

	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Accounts Payable	2,880				2,880
Purchase's Payments
Quarter 1	36,000	24,000			60,000
Quarter 2		44,640	29,760		74,400
Quarter 3			38,880	25,920	64,800
Quarter 4				31,680	31,680
Total Cash Disbursements for materials	38,880	68,640	68,640	57,600	233,760

(NOTE: The management pays 60% of raw material in the same quarter acquired and 40% in the next quarter , accordingly the payments are distributed in every quarter . This years quarter 4 balance 40% will be recovered next year first quarter.)

Required 4)

	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Required Production (units) [a]	5,000	8,000	7,000	6,000	26,000
Direct labor hours per unit [b]	0.20	0.20	0.20	0.20	0.20
Total direct labor hours needed (c=a*b)	1,000	1,600	1,400	1,200	5,200
Direct Labor cost per hour (d)	$11.50	$11.50	$11.50	$11.50	$11.50
Total Direct Labor Cost (c * d)	$11,500	$18,400	$16,100	$13,800	$59,800