Exercise 9-4 Direct Labor Budget [LO9-5] 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 10,800 8,000 8,400 10,700 Each unit requires 0.65 direct labor-hours, and direct laborers are paid $16 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.) 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 6,500 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 6,500 hours anyway. Any hours worked in excess of 6,500 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.)
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Exercise 9-4 Direct Labor Budget [LO9-5]
The production manager of Rordan Corporation has submitted the following
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Units to be produced | 10,800 | 8,000 | 8,400 | 10,700 |
|
|
Each unit requires 0.65 direct labor-hours, and direct laborers are paid $16 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.)
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 6,500 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 6,500 hours anyway. Any hours worked in excess of 6,500 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.)
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