Question

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	10,000	7,500	8,000	10,300

Each unit requires 0.55 direct labor-hours, and direct laborers are paid $14.00 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.)

Rordan Corporation
Direct Labor Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Required production in units
Direct labor time per unit (hours)
Total direct labor-hours needed
Direct labor cost per hour
Total direct labor cost

     

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 5,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 5,000 hours anyway. Any hours worked in excess of 5,000 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.)

Rordan Corporation
Direct Labor Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total direct labor-hours needed
Regular hours paid
Overtime hours paid	0	0	0	0
Wages for regular hours					$0
Overtime wages
Total direct labor cost	$0	$0	$0	$0	$0

Answer 1

SOLUTION

(A)

Rordan Corporation

Direct Labor Budget

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Regular production in units	10,000	7,500	8,000	10,300	35,800
Direct labor time per unit (hours)	0.55	0.55	0.55	0.55	0.55
Total direct labor-hours needed	5,500	4,125	4,400	5,665	19,690
Direct labor cost per hour	$14	$14	$14	$14	$14
Total direct labor cost	$77,000	$57,750	$61,600	$79,310	$275,660

(B)

Rordan Corporation

Direct Labor Budget

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Total direct labor-hours needed	5,500	4,125	4,400	5,665
Regular hours paid	5,000	5,000	5,000	5,000
Overtime hours paid	500	0	0	665
Wages for regular hours (@14 per hour)	$70,000	$70,000	$70,000	$70,000	$280,000
Overtime wages (@1.5 * $14 per hour)	$10,500	0	0	$13,965	$24,465
Total direct labor cost	$80,500	$70,000	$70,000	$83,965	$304,465