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The production department of Zan Corporation has submitted the following forecast of units to be produced...

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Accounting

The production department of Zan Corporation has submitted thefollowing forecast of units to be produced by quarter for theupcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4thQuarter Units to be produced 10,000 13,000 12,000 11,000 Inaddition, 20,000 grams of raw materials inventory is on hand at thestart of the 1st Quarter and the beginning accounts payable for the1st Quarter is $5,800. Each unit requires 8 grams of raw materialthat costs $1.40 per gram. Management desires to end each quarterwith an inventory of raw materials equal to 25% of the followingquarter’s production needs. The desired ending inventory for the4th Quarter is 7,000 grams. Management plans to pay for 60% of rawmaterial purchases in the quarter acquired and 40% in the followingquarter. Each unit requires 0.40 direct labor-hours and directlaborers are paid $11.50 per hour. Required: 1.&2. Calculatethe estimated grams of raw material that need to be purchased andthe cost of raw material purchases for each quarter and for theyear as a whole. 3. Calculate the expected cash disbursements forpurchases of materials for each quarter and for the year as awhole. 4. Calculate the estimated direct labor cost for eachquarter and for the year as a whole. Assume that the direct laborworkforce is adjusted each quarter to match the number of hoursrequired to produce the estimated number of units produced.

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4.4 Ratings (569 Votes)

Rawmaterial Budget and Cash Disbursement
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Units to be produced 10000 13000 12000 11000 46000
grams/unit 8 8 8 8
Rawmaterial Quantity Required 8gm 80000 104000 96000 88000 368000
Ending Inventory Rawmaterial 25% of next quarter production needs 26000 24000 22000 7000
Total Rawmaterial Required 106000 128000 118000 95000 447000
Less Beginning Inventory 20000 26000 24000 22000
Rawmaterial Inventory needed (grams) 86000 102000 94000 73000 355000
Raw material Cost/gram $               1.4 $               1.4 $              1.4 $              1.4
Total Rawmaterial Cost Purchase $     120,400 $     142,800 $    131,600 $    102,200 497000
Expected Cash Disbursement
60% in same quarter $        72,240 $        85,680 $       78,960 $       61,320 298200
40% in following quarter $          5,800 $        48,160 $       57,120 $       52,640 163720
Total Cash Disbursement $        78,040 $     133,840 $    136,080 $    113,960 461920
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Units to be produced 10000 13000 12000 11000 46000
Direct Labour/Unit 0.4 0.4 0.4 0.4
Total Direct Labour Hours 4000 5200 4800 4400
Direct Labour cost/hour $            11.5 $            11.5 $           11.5 $           11.5
Direct Labour Cost $        46,000 $        59,800 $       55,200 $       50,600 $ 211,600

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