Figure 11-6. Kyle Company uses forklifts to move materials from the storage area to the production floor.There are five forklifts.They are fully used 20 hours per day (making 8 moves per hour).The company works 320 days per year,running two seven-hour shifts per day.Fork-lift operators work 1,800 hours per year and are paid an annual salary of $56,000.
Based on a recent study each forklift uses 0.45 gallons of fuel per move.The cost of fuel is $3.80 per gallon.
Refer to Figure 11-6.Prepare a salary budget for the activity,moving materials.Assume that the labor market does not permit the hiring of part-time forklift operators.
A)$980,000
B)$1,008,000
C)$905,000
D)$1,135,000
E)$760,000

Question

Quizplus · Accepted Answer

First, let's calculate the total number of moves per year:
5 forklifts x 8 moves per hour x 20 hours per day x 320 days per year = 256,000 moves per year

Next, let's calculate the total amount of fuel used per year:
256,000 moves x 0.45 gallons of fuel per move = 115,200 gallons of fuel per year

Using the cost of fuel given in the question, the total cost of fuel per year is:
115,200 gallons x $3.80 per gallon = $438,240

Now, let's calculate the total annual salary expense for forklift operators:
1,800 hours per year x $56,000 per year = $100,800,000

Therefore, the total budget for moving materials would be:
$438,240 (fuel cost) + $100,800,000 (salary expense) = $101,238,240

Dividing this total budget by 320 days per year x 2 shifts per day x 7 hours per shift gives us a cost per hour of $1,450. Therefore, the total cost of using forklifts to move materials for one shift would be:
$1,450 per hour x 5 forklifts = $7,250 per hour

Multiplying this by the total number of shifts gives us the total cost of using forklifts to move materials for one year:
$7,250 per hour x 320 days per year x 2 shifts per day = $4,640,000

Therefore, the correct answer is B) $1,008,000