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	11,000	8,000	8,500	10,800

Each unit requires 0.75 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 8,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 8,000 hours anyway. Any hours worked in excess of 8,000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.

Answer 1

			Rordan Corporation
		Direct Labor Budget
				1st QTR	2nd QTR	3rd QTR	4th QTR	year
Required production in units		11,000	8,000	8,500	10,800
direct labor time per unit(hours)		0.75	0.75	0.75	0.75
total direct labor hours needed		8250	6000	6375	8100
direct labor cost per hour		16	16	16	16
total direct labor cost		132000	96000	102000	129600	459600
			Rordan Corporation
		Direct Labor Budget
				1st QTR	2nd QTR	3rd QTR	4th QTR	year
Required production in units		11,000	8,000	8,500	10,800
direct labor time per unit(hours)		0.75	0.75	0.75	0.75
total direct labor hours needed		8250	6000	6375	8100
regualar hours			8,000	8,000	8,000	8,000
ovetime hours			250	0	0	100
wages for regular hours		112000	112000	112000	112000
overtime wages			6000	0	0	2400
total direct labor cost		118000	112000	112000	114400	456400