Exercise 8-4 Direct Labor Budget [LO8-5] The production manager of Rordan Corpor

Question

Exercise 8-4 Direct Labor Budget [LO8-5]

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

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.)

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 7,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 7,000 hours anyway. Any hours worked in excess of 7,000 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.)

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

Explanation / Answer

Solution A Q1 Q2 Q3 Q4 No of units          12,000          9,000          7,200          11,300 Direct labor hour per unit              0.65            0.65            0.65              0.65 Total Direct labor hours needed            7,800          5,850          4,680            7,345 Direct labor cost per hour                  20                20                20                  20 Total Direct labor cost       156,000     117,000       93,600       146,900 Solution B Q1 Q2 Q3 Q4 No of units          12,000          9,000          7,200          11,300 Direct labor hour per unit              0.65            0.65            0.65              0.65 Total Direct labor hours needed            7,800          5,850          4,680            7,345 Paid labor hours Normal rate            7,000          7,000          7,000            7,000 Overtime rate                800                345 Direct labor cost per hour-normal rate                  20                20                20                  20 Direct labor cost per hour-overtime rate                  30                30                30                  30 Direct labor cost-normal       140,000     140,000     140,000       140,000 Direct labor cost-overtime          24,000                 -                   -            10,350 Total Direct labor cost       164,000     140,000     140,000       150,350

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