Question

Exercise 7-4 Direct Labor Budget [LO7-5]

The production manager of Rordan 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	8,200	6,500	7,100	8,000

Each unit requires 0.25 direct labor-hours, and direct laborers are paid $12.00 per hour.

Required:
1.	Complete the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. (Round "Direct labor time per unit (hours)" answers to 2 decimal places.)

     

2.

Complete 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 1,800 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 1,800 hours anyway. Any hours worked in excess of 1,800 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. (Input all amounts as positive values.)

     

Answer 1

	Q1	Q2	Q3	Q4	Total
Required production (Units)	8200	6500	7100	8000	29,800
Direct labour time Per unit	0.25	0.25	0.25	0.25	0.25
Hours needed	2050	1625	1775	2000	7450
Direct labour cost per hour	12	12	12	12	12
Total direct labour cost	$24,600	$19500	$21,300	$24,000	$89,400

Answer 1

Answer 2

	Q1	Q2	Q3	Q4	Total
Hours worked	2050	1625	1775	2000	7450
Minimum hours to be worked	1800	1800	1800	1800
Overtime	250	n/a	n/a	200
Minimum direct wages to be paid	(1,800*12)= 21600	(1,800*12)= 21600	(1,800*12)= 21600	(1,800*12)= 21600	86,400
Overtime	(250*18)=4500	-	-	(200*18)=3600	8,100
Total	26100	21600	21600	25200	94,500