Question

The production department of Raredon Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

  

    1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
Units to be produced   23,000   29,000   26,000   23,000

Each unit requires 1.2 direct labour-hours, and direct labour-hour workers are paid $22 per hour.

In addition, the variable manufacturing overhead rate is $1.40 per direct labour-hour. The fixed manufacturing overhead is $170,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $54,000 per quarter.

  

Required:

1. Prepare the company's direct labour budget for the upcoming fiscal year, assuming that the direct labour 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 manufacturing overhead budget.

Answer 1

1
Raredon Corporation
Direct Labor Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Required production in units	23000	29000	26000	23000	101000
Direct labor time per unit (hours)	1.2	1.2	1.2	1.2	1.2
Total direct labor­ hours needed	27600	34800	31200	27600	121200
Direct labor cost per hour	22	22	22	22	22
Total direct labor cost	607200	765600	686400	607200	2666400
2
Raredon Corporation
Manufacturing Overhead Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Year
Variable manufacturing overhead	38640	48720	43680	38640	169680
Fixed manufacturing overhead	170000	170000	170000	170000	680000
Total manufacturing overhead	208640	218720	213680	208640	849680
Less depreciation	54000	54000	54000	54000	216000
Cash disbursements for manufacturing overhead	154640	164720	159680	154640	633680