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 7,000 2nd Quarter 10,000 3rd Quarter 9,000 4th Quarter 8,000 In addition, 8,750 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 $5,200. Each unit requires 5 grams of raw material that costs $1.60 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 6,000 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 $13.50 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.

Answer 1

1 and 2)	Particulars			Q1	Q2	Q3	Q4
	Units to be produced			7000	10000	9000	8000
	R.M required per unit			5	5	5	5
	Total production need			35000	50000	45000	40000
Add:	Desired ending R.M inventory			12500	11250	10000	6000
Less:	Beginning R.M inventory			8750	12500	11250	10000
	R.M purchase required			38750	48750	43750	36000
	Cost of R.M per gram			$           1.60	$           1.60	$           1.60	$           1.60
	Cost of R.M to be purchased			$ 62,000.00	$ 78,000.00	$ 70,000.00	$ 57,600.00

3)	Particulars			Q1	Q2	Q3	Q4
	Cost of R.M to be purchased			$ 62,000.00	$ 78,000.00	$ 70,000.00	$ 57,600.00
	Payment made for the month of:
	Last year's Q4			$    5,200.00
	Q1			$ 37,200.00	$ 24,800.00
	Q2				$ 46,800.00	$ 31,200.00
	Q3					$ 42,000.00	$ 28,000.00
	Q4						$ 34,560.00
	Cash disbursement for R.M			$ 42,400.00	$ 71,600.00	$ 73,200.00	$ 62,560.00

4)	Particulars			Q1	Q2	Q3	Q4	Total
	Units to be produced			7000	10000	9000	8000
	Labor hour req. per unit			0.2	0.2	0.2	0.2
	Total Labor hours req			1400	2000	1800	1600
	Labor rate per hour			$         13.50	$         13.50	$         13.50	$         13.50
	Labor cost			$ 18,900.00	$ 27,000.00	$ 24,300.00	$ 21,600.00	$ 91,800.00