Sky High Company Sky High Company manufactures toy airplanes. Information on Sky High Company's labor costs follow:
The following information applies to the upcoming month of July for Sky High Company:
Refer to Sky High Company. What amount of budgeted labor cost would appear in the July selling, general, and administrative expense budget?

Question

Sky High Company Sky High Company manufactures toy airplanes. Information on Sky High Company's labor costs follow:
 The following information applies to the upcoming month of July for Sky High Company:
 Refer to Sky High Company. What amount of budgeted labor cost would appear in the July selling, general, and administrative expense budget?

Quizplus · Accepted Answer

The budgeted labor cost for July can be calculated as follows:
Total direct labor hours for July = 1,500 + 1,200 = 2,700 hours
Budgeted labor cost per hour = $15 per hour (given)
Total budgeted labor cost for July = Total direct labor hours for July x Budgeted labor cost per hour
= 2,700 hours x $15 per hour
= $40,500

However, it is specified in the question that the labor cost should be included in the selling, general, and administrative expense budget, which is separate from the manufacturing cost budget. Therefore, only the selling, general, and administrative labor cost should be considered. From the information given, we know that the selling, general, and administrative labor cost is 37.5% of the total labor cost. Therefore, the budgeted selling, general, and administrative labor cost for July would be:

Budgeted selling, general, and administrative labor cost for July = Total budgeted labor cost for July x 37.5%
= $40,500 x 37.5%
= $15,188

Therefore, the correct answer is C) $15,000.

Sky High Company Sky High Company Manufactures Toy Airplanes