The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:  1st Quarter2nd Quarter3rd Quarter4th QuarterUnits to be produced23,00026,00025,00024,000  In addition, 34,500 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 $8,400. Each unit requires 6 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 $14.50 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.

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Asked Dec 5, 2019
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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 2nd Quarter 3rd Quarter 4th Quarter
Units to be produced 23,000 26,000 25,000 24,000
 

 

In addition, 34,500 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 $8,400.

 

Each unit requires 6 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 $14.50 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.

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Estimated grams of raw materials that need to be purchased and cost of raw materials to be purchased.

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Quarter 4 Quarter 1 23,000 Quarter 2 26,000 Particulars Quarter 3 25,000 Units produced Multiply: Raw materials per unit (grams) 24,000 156,000 37,500 150,000 36,000 (144,000x25%) 37,500 (150,000x25%) Total raw materials neede for budget production Add: estimated ending inventory of raw material 138,000 144,000 39,000 (156,000x25%) 34.500 6,000 (150,000x25%) 39,000 (156,000x25%) 36.000 Less: Begonning inventory of raw material (138,000x25%) |(144,000x25%) Estimated grams of raw materials that need to be purchased 142,500 154,500 148,500 114,000 1.60 $228,000 1.60 $247,200 1.60 Multiply: Cost of raw materials per gram Cost of raw materials to be purchased 1.60 $237,600 $182,400

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Quarter 4 Quarter 2 $247,200 Quarter 3 $237,600 Particulars Quarter 1 $228,000 Cost of raw materials to be purchased Cash disbrusement of raw materials : 60% paid are paid in the quarter of purchase S182,400 136,800 8,400 148,320 109,440 142,560 98,880 40% of purchase are paid following the quarter of purchase 91,200 72,960 S145,200 Total expected cash disbursement for purchase of materials $239,520 $241,440 S182,400

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