Direct Labor Budget: The production manager of Rordan Corporation has submitted

ID: 2468119 • Letter: D

Question

Direct Labor Budget: The production manager of Rordan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

Each unit requires 0.35 direct labor-hours, and direct laborers are paid $12.00 per hour.

Construct the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

Construct 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.

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 8,000 6,500 7,000 7,500

Explanation / Answer

Company’s direct labor budget for the upcoming fiscal year

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Total

Units to be produced (A)

8000

6500

7000

7500

29000

Direct labor-hours per unit (B)

0.35

Direct Labor Hours Required for production (C)= A*B

2800

2275

2450

2625

10150

Overtime Hours (More than 2600 Hours) (D)

200

225

Wages Rate per hour (E)

$12

Overtime wages (Overtime hours * $12 *1.5) = (F)=D*E*1.5

$ 3,600

$450

$ 4,050

Minimum guaranteed wages to be paid (2600 hours * $12) =(G)

$ 31,200

$ 124,800

Total Wages to be paid =F+G =

$ 34,800

$ 31,200

$ 31,650

$ 128,850