Question

5. The production manager of Triton Enterprises, Inc. has submitted the following quarterly production forecast for the upcoming fiscal year: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Units to be produced 8,000 6,500 7,000 7,500 Each unit requires 0.70 direct labor-hours, and direct laborers are paid $15.00 per hour. A) 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. B) 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 5,200 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 5,200 hours anyway. Any hours worked in excess of 5,400 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. 6. The direct labor budget of Regan LLC for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter Budgeted direct labor-hours 8,000 8,200 8,500 7,800 The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $6.50 per direct labor-hour and its total fixed manufacturing overhead is $64,000 per quarter. The only noncash item include in fixed manufacturing overhead is depreciation, which is $20,000 per quarter. A) Prepare the company’s manufacturing overhead budget for the upcoming fiscal year. B) Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year. Round off to the nearest whole cent.

Answer 1

Answer 1-a.
Triton Enterprises Inc.
Direct Labor Budget
	Qtr 1	Qtr 2	Qtr 3	Qtr 4	Total
Required production in Units	8,000.00	6,500.00	7,000.00	7,500.00	29,000.00
Direct Labor Hour per Unit	0.70	0.70	0.70	0.70	0.70
Total Direct Labor Hours Required	5,600.00	4,550.00	4,900.00	5,250.00	20,300.00
Cost per Direct Labor Hour	15.00	15.00	15.00	15.00	15.00
Direct Labor Cost	84,000.00	68,250.00	73,500.00	78,750.00	304,500.00
Answer 1-b.
Triton Enterprises Inc.
Direct Labor Budget
	Qtr 1	Qtr 2	Qtr 3	Qtr 4	Total
Required production in Units	8,000.00	6,500.00	7,000.00	7,500.00	29,000.00
Direct Labor Hour per Unit	0.70	0.70	0.70	0.70	0.70
Total Direct Labor Hours Required	5,600.00	4,550.00	4,900.00	5,250.00	20,300.00
Regular Hours Paid	5,200.00	5,200.00	5,200.00	5,200.00	20,800.00
Overtime Hours Paid	400.00	-	-	50.00	450.00
Wages for Regular Hours - Regular Hrs X $15	78,000.00	78,000.00	78,000.00	78,000.00	312,000.00
Wages for Overtime Hours - Overtime Hrs X $15 X 1.50	9,000.00	-	-	1,125.00	10,125.00
Total Direct Labor Cost	87,000.00	78,000.00	78,000.00	79,125.00	322,125.00
Answer 2-a.
Manufacturing Overhead Budget
	Qtr 1	Qtr 2	Qtr 3	Qtr 4	Total
Budgeted Direct Labor Hours	8,000.00	8,200.00	8,500.00	7,800.00	32,500.00
Variable Overhead - $6.50 X Labor Hours	52,000.00	53,300.00	55,250.00	50,700.00	211,250.00
Fixed Overhead	64,000.00	64,000.00	64,000.00	64,000.00	256,000.00
Total Manufacturing Overhead	116,000.00	117,300.00	119,250.00	114,700.00	467,250.00
Answer 2-b.
Predetermined Overhead Rate
Variable Overhead - $211,250 / 32,500 DLH	6.50	per DLH
Fixed Overhead - $256,000 / 32,500 DLH	7.88	per DLH
Total Predetermined Overhead Rate	14.38	per DLH