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 9,600 7,500 7,800 10,100 Each unit requires 0.65 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 6,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 6,000 hours anyway. Any hours worked in excess of 6,000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.

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 6,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 6,000 hours anyway. Any hours worked in excess of 6,000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. (Round "Direct labor time per unit (hours)" answers to 2 decimal places.)

Answer 1

1) Direct labor budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Production units	9600	7500	7800	10100	35000
Labor hour per unit	0.65	0.65	0.65	0.65	0.65
Production labor hour	6240	4875	5070	6565	22750
rate per hour	10	10	10	10	10
Direct labor cost	62400	48750	50700	65650	227500

2) Direct labor budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Production labor hour	6240	4875	5070	6565	22750
Regular hour	6000	6000	6000	6000	24000
Overtime hour	240			565	805
Wages for regular hour	60000	60000	60000	60000	240000
Wages for overtime hour	3600			8475	12075
Total direct labor cost	63600	60000	60000	68475	252075