The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming fiscal year:

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	9,800	7,500	7,900	10,200

Each unit requires 0.75 direct labor-hours, and direct laborers are paid $14.00 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 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.

 

Explanation

2.

Wages for regular hours:

1st Quarter = 7,000 × $14 per hour = $98,000

2nd Quarter = 7,000 × $14 per hour = $98,000

3rd Quarter = 7,000 × $14 per hour = $98,000

4th Quarter = 7,000 × $14 per hour = $98,000

Overtime wages:

1st Quarter = 350 × $14 per hour × 1.5 = $7,350

2nd Quarter = 0 × $14 per hour × 1.5 = $0

3rd Quarter = 0 × $14 per hour × 1.5 = $0

4th Quarter = 650 × $14 per hour × 1.5 = $13,650

Thanks