LFM Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.5 hours of direct labor at the rate of $16.00 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. The company plans to sell 31,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 100 and 600 units, respectively. Budgeted direct labor costs for June would be:
A)$1,764,000
B)$504,000
C)$1,708,000
D)$1,736,000

Question

Quizplus · Accepted Answer

To calculate the budgeted direct labor costs for June, first determine the number of units to be produced: 31,000 units to be sold + 600 ending inventory - 100 beginning inventory = 31,500 units to be produced. Each unit requires 3.5 hours of labor, so 31,500 units x 3.5 hours/unit = 110,250 hours. At $16 per hour, the total labor cost is 110,250 hours x $16/hour = $1,764,000.

LFM Corporation Makes and Sells a Product Called Product WZ