My Company, Inc. has determined that its planned production for the upcoming fiscal year is:
Units to be produced: First Quarter = 6,000
Second Quarter = 7,000
Third Quarter = 6,500
Fourth Quarter = 5,500
Each unit requires 1.4 direct labor hours and workers are paid $12.50 per hour. The variable manufacturing overhead rate is $0.75 per direct labor hour. The fixed manufacturing overhead is $90,000 per quarter. The only non-cash element of manufacturing overhead is depreciation, which is $20,000 per quarter. All labor costs and manufacturing overhead is paid in the quarter incurred.
Required:
1] Prepare the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor work force is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.
2] Prepare the company’s manufacturing overhead budget.
