Neubert Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 5,300 units, but its actual level of activity was 5,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December:Data used in budgeting: Actual results for December:
The direct labor in the planning budget for December would be closest to:
A) $18,550
B) $17,980
C) $18,690
D) $17,845

Question

Neubert Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 5,300 units, but its actual level of activity was 5,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for December:Data used in budgeting:  Actual results for December:
 The direct labor in the planning budget for December would be closest to:
A) $18,550 
B) $17,980 
C) $18,690 
D) $17,845

Quizplus · Accepted Answer

The direct labor cost formula per unit is $12.60 + ($1.40 × DLH per unit). 
In the planning budget, DLH per unit is 0.50 hours ($750 ÷ 1500 units). 
Therefore, direct labor in the planning budget for December is : 
$12.60 + ($1.40 x 0.50 hours x 5,300 units) = $18,550. 
This is closest to choice A.

Neubert Corporation Manufactures and Sells a Single Product