Witherington Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 7,800 units, but its actual level of activity was 7,850 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June:
-The direct labor in the planning budget for June would be closest to:
A) $32,970
B) $32,760
C) $34,310
D) $34,091

Question

Witherington Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During June, the company budgeted for 7,800 units, but its actual level of activity was 7,850 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for June: 
-The direct labor in the planning budget for June would be closest to:
A) $32,970 
B) $32,760 
C) $34,310 
D) $34,091

Quizplus · Accepted Answer

The direct labor cost formula per unit in the planning budget is $4.20 ($42,000 ÷ 10,000 units = $4.20 per unit).

In the flexible budget, the direct labor cost per unit is the same, at $4.20 per unit.

Therefore, the direct labor cost in the planning budget for June would be:

$4.20 per unit × 7,800 units = $32,760.

Option B is the closest to this amount.

Witherington Corporation Manufactures and Sells a Single Product