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 8,200 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. 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 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.

Answer 1

Answer 1

Direcyt Labor Budget
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Unit to be produced	8,200.00	6,500.00	7,100.00	8,000.00
Less : Labor Hour per unit 0.25 for each as per question	0.25	0.25	0.25	0.25
Total Hours needed for production ( units x labor hour per unit)	2,050.00	1,625.00	1,775.00	2,000.00
Hourly Rate	12.00	12.00	12.00	12.00
Labor Cost (Hours Needed x Hourly rate)	24,600.00	19,500.00	21,300.00	24,000.00

Answer 2

Direct Labor Budget
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Unit to be produced	8,200	6,500	7,100	8,000
Less : Labor Hour per unit 0.25 for each as per question	0.25	0.25	0.25	0.25
Total Hours needed for production ( units x labor hour per unit)	2,050	1,625	1,775	2,000
Normal Hours (from Question)	1,800	1,800	1,800	1,800
Excess of Normal Hours (Overtime)	250	-	-	200
Rate for per hour	12	12	12	12
Wage for normal hours ( 1800 x hourly rate)	21,600	21,600	21,600	21,600
Overtime Wages	4,500	-	-	3,600
Total Cost	26,100	21,600	21,600	25,200

Question mentioned that over time will get 1.5 times of normal rate. That is normal rate x 1.5 = 12 x 1.5 = 18

Overtime wages calculated = Overtime hours x 18