Hennessey Company manufactures card tables.The company has a policy of maintaining a finished goods inventory equal to 40 percent of the next month's planned sales.Each card table requires 3 hours of labor.The budgeted labor rate for the coming year is $13 per hour.Planned sales for the months of April,May,and June are respectively 4,000;5,000;and 3,000 units.What is Hennessey Company's budgeted direct labor cost for May?

Question

Quizplus · Accepted Answer

First, we need to find out the planned production for May, based on the inventory policy. 
Planned production for May = 0.4 x 5,000 (planned sales for June) = 2,000 units

Then, we can calculate the total direct labor cost for May: 
Total hours of direct labor = 2,000 units x 3 hours per unit = 6,000 hours 
Direct labor cost for May = 6,000 hours x $13 per hour = $78,000

Therefore, the budgeted direct labor cost for May is $78,000, which is option B.

Hennessey Company Manufactures Card Tables