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The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming...

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 8,000 6,500 7,000 7,500

Each unit requires 0.35 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 2,600 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 2,600 hours anyway. Any hours worked in excess of 2,600 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor.

The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:

1st Quarter 2nd Quarter 3rd Quarter 4th 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 $3.25 per direct labor-hour and its total fixed manufacturing overhead is $48,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 per quarter.

Required:

1. Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.

2. Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.

Solutions

Expert Solution

A.) Rordan Corporation
1. Assuming that the direct labor workforce is adjusted each quarter, the direct labor budget is:
Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced              8,000             6,500            7,000              7,500        29,000
Direct labour hour per unit 0.35 0.35 0.35 0.35 0.35
Total Direct Labour Hours           2,800             2,275            2,450              2,625        10,150
Direct labour cost per hour 12 12 12 12 12
Total Direct Labour Cost         33,600           27,300          29,400            31,500    1,21,800
2. Assuming that the direct labor workforce is not adjusted each quarter and that overtime wages are
paid, the direct labor budget is:
Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced              8,000             6,500            7,000              7,500
Direct labour hour per unit 0.35 0.35 0.35 0.35
Total Direct Labour Hours           2,800             2,275            2,450              2,625
Regular Hours Paid            2,600             2,600            2,600              2,600
Overtime Hours paid               200                    -                     -                25.00
Wages for Regular Hours (@ 12)         31,200           31,200          31,200            31,200    1,24,800
Wages for overtime hours (@1.5 x 12 )            3,600                    -                     -                   450          4,050
Total Direct Labour Cost         34,800           31,200          31,200            31,650    1,28,850
B.) Yuvwell Corporation
1.) Particulars 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted Direct Labour Hours            8,000             8,200            8,500              7,800        32,500
Variable overhead rate 3.25 3.25 3.25 3.25 3.25
Variable manufacturing overhead         26,000           26,650          27,625            25,350    1,05,625
Fixed manufacturing Overhead         48,000           48,000          48,000            48,000    1,92,000
Total Manufacturing Overhead         74,000           74,650          75,625            73,350    2,97,625
Less: Depreciation        -16,000         -16,000        -16,000          -16,000      -64,000
Cash disbursements for manufacturing overhead         58,000           58,650          59,625            57,350    2,33,625
2.) Total budgeted manufacturing overhead for the year $ 297,625
Total budgeted direct labor-hours for the year   
ekkarill92 answered 1 year ago
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