Question

The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 8,800 7,000 7,400 8,300 Each unit requires 0.55 direct labor-hours, and direct laborers are paid $10.00 per hour. Required: 1. Prepare the company’s direct labor budget for the upcoming fiscal year. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. 2. Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is not adjusted each quarter. Instead, assume that the company’s direct labor workforce consists of permanent employees who are guaranteed to be paid for at least 4,500 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 4,500 hours anyway. Any hours worked in excess of 4,500 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. rev: 03_30_2020_QC_CS-205911

Answer 1

1) Direct labor budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Unit produced	8800	7000	7400	8300	31500
Labor hour per unit	0.55	0.55	0.55	0.55	0.55
Production labor hour	4840	3850	4070	4565	17325
Rate per hour	10	10	10	10	10
Direct labor cost	48400	38500	40700	45650	173250

2) Direct labor budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Unit produced	8800	7000	7400	8300	31500
Labor hour per unit	0.55	0.55	0.55	0.55	0.55
Production labor hour	4840	3850	4070	4565	17325
Regular hour	4500	4500	4500	4500	18000
Overtime hour	340			65	405
Wages for regular hour	45000	45000	45000	45000	180000
Wages for overtime hour	5100			975	6075
Direct labor cost	50100	45000	45000	45975	186075