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	25,000	27,000	27,000	22,000

Each unit requires 1.3 direct labour-hours, and direct labour-hour workers are paid $20 per hour.

In addition, the variable manufacturing overhead rate is $1.50 per direct labour-hour. The fixed manufacturing overhead is $163,500 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $47,500 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

Question 1

Direct Labour Cost Budget

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Budgeted Units	25,000	27,000	27,000	22,000	101,000
* Direct Labour Hours per Unit	1.3	1.3	1.3	1.3	1.3
Budgeted Direct Labour Hours	32,500	35,100	35,100	28,600	131,300

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Budgeted Direct Labour Hours	32,500	35,100	35,100	28,600	131,300
* Direct Labour Rate per Hour	20	20	20	20	20
Budgeted Direct Labour Cost	650,000	702,000	702,000	572,000	2,626,000

Question 2

Manufacturing Overhead Budget

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Variable Manufacturing Overhead	48,750	52,650	52,650	42,900	196,950
Fixed Manufacturing Overhead	163,500	163,500	163,500	163,500	654,000
Total Manufacturing Overheads	212,250	216,150	216,150	206,400	850,950
Less: Depreciation	(47,500)	(47,500)	(47,500)	(47,500)	(190,000)
Cash Disbursement for Manufacturing Overhead	164,750	168,650	168,650	158,900	660,950

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Budgeted Labour Hours	32,500	35,100	35,100	28,600	131,300
* Variable Manufacturing Overhead per Direct Labour Hour	1.5	1.5	1.5	1.5	1.5
Variable Manufacturing Overhead	48,750	52,650	52,650	42,900	196,950