The production manager of Rordan Corporation has submitted the following quarter

Question

The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming fiscal year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Units to be produced 9,400 7,000 7,700 10,000 Each unit requires 0.25 direct labor-hours, and direct laborers are paid $10.00 per hour Required: 1. Prepare the company's direct labor budget for the upcoming fiscal year. Assume that the direct labor 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 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 2,200 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 2,200 hours anyway. Any hours worked in excess of 2,200 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor

Explanation / Answer

LABOUR COST BUDGETS QUARTER-1 QUARTER-2 QUARTER-3 QUARTER-4 TOTAL Units to be produced 9,400 7,000 7,700 10,000 34,100 Labour required per unit 0.25 0.25 0.25 0.25 0.25 Labour hours 2350 1750 1925 2500 8525 Labuor Rate per hour 10 10 10 10 10 Budgeted Labour cost in $ 23,500 17,500 19,250 25,000 85,250 LABOUR COST BUDGETS QUARTER-1 QUARTER-2 QUARTER-3 QUARTER-4 TOTAL Units to be produced 9,400 7,000 7,700 10,000 34,100 Labour required per unit 0.25 0.25 0.25 0.25 0.25 Total Llabour hours 2350 1750 1925 2500 8525 Regular Hours 2200 2200 2200 2200 8800 Overtime hours 150 0 0 300 450 Wages for Regular hours 22000 22000 22000 22000 88000 Overtime wages 2250 0 0 4,500 6,750 Budgeted Labour cost in $ 24,250 22,000 22,000 26,500 94,750

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