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 20,000 23,000 22,000 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.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Exercise 8-16 (Algo) Direct Materials and Direct Labor Budgets [LO8-4, LO8-5]
The production department of Zan Corporation has submitted the following
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
|---|---|---|---|---|
| Units to be produced | 20,000 | 23,000 | 22,000 | 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. and 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.
![Exercise 8-16 (Algo) Direct Materials and Direct Labor Budgets [LO8-4, LO8-5]
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
20,000
23,000
22,000
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. and 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.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 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
2nd
3rd
4th
Year
Quarter
Quarter
Quarter
Quarter
Estimated grams of raw material to be purchased
Cost of raw materials to be purchased
< Req 1 and 2
Req 3 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F16afad9b-824d-42b7-9e40-175f68ea31da%2Fda28e799-30e1-477c-8bf5-d5e4906f07e9%2Fs7jlvmc_processed.png&w=3840&q=75)
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