Exercise 7-4 Direct Labor Budget [LO7-5] The production manager of Rordan Corpor

Question

Exercise 7-4 Direct Labor Budget [LO7-5] The production manager of Rordan 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 10,000 7,500 10,300 Each unit requires 0.55 direct labor-hours, and direct laborers are paid $14.00 per hour. Required 1. Complete 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. Round "Direct labor time per unit (hours)" answers to 2 decimal places.) Rordan Corporation Direct Labor Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Required production in units Direct labor time per unit (hours) Total direct labor-hours needed Direct labor cost per hour Total direct labor cost 2. Complete 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 5,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 5,000 hours anyway. Any hours worked in excess of 5,000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. (Input all amounts as positive values.)

Explanation / Answer

1st quarter 2nd quarter 3rd quarter 4th quarter Year Required production in units 10000 7500 8000 10300 35800 Direct labor time per unit (hours) 0.55 0.55 0.55 0.55 0.55 Total direct labor-hours needed 5500 4125 4400 5665 19690 Direct labor cost per hour 14 14 14 14 14 Total direct labor cost 77000 57750 61600 79310 275660 2 1st quarter 2nd quarter 3rd quarter 4th quarter Year Total direct labor-hours needed 5500 4125 4400 5665 19690 Regular hours paid 5000 5000 5000 5000 20000 Overtime hours paid 500 0 0 665 1165 Wages for regular hours 70000 70000 70000 70000 280000 Overtime wages 10500 0 0 13965 24465 Total direct labor cost 80500 70000 70000 83965 304465

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