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 11,200 8,500 8,600 10,900 Each unit requires 0.55 direct labor-hours, and direct laborers are paid $16.00 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 5,900 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 5,900 hours anyway. Any hours worked in excess of 5,900 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.

Answer 1

1) Direct labor Budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
Production unit	11200	8500	8600	10900	39200
Labor hour per unit	0.55	0.55	0.55	0.55	0.55
Production labor hour	6160	4675	4730	5995	21560
rate per hour	16	16	16	16	16
Direct labor cost	98560	74800	75680	95920	344960

2) Direct labor Budget

	1st quarter	2nd quarter	3rd quarter	4th quarter	Year
production labor hour	6160	4675	4730	5995	21560
Regular hour	5900	5900	5900	5900	23600
Overtime hour	260			95	355
Wages for regular hour	94400	94400	94400	94400	377600
Wages for overtime hour	6240			2280	8520
Total direct labor cost	100640	94400	94400	96680	386120