It takes 30 minutes of direct labor time to make one unit. Direct labor wages average $17 per hour. Variable overhead is applied at the rate of $5 per direct labor hour. Fixed overhead is budgeted at $56,500 per month.
-Refer to Figure 9-4. What is the direct labor cost budgeted for November?

Question

Quizplus · Accepted Answer

Direct labor cost = Direct labor hours x Direct labor rateDirect labor hours = Units produced x Direct labor time per unitDirect labor rate = Direct labor wages per hourUnits produced = Budgeted production in unitsBudgeted production in units = Budgeted sales in units + Desired ending inventory in units - Beginning inventory in unitsBudgeted sales in units = Budgeted sales in dollars / Selling price per unitSelling price per unit = $25Budgeted sales in dollars = $2,152,000Desired ending inventory in units = 10,000 unitsBeginning inventory in units = 5,000 unitsDirect labor time per unit = 30 minutesDirect labor wages per hour = $17Therefore,Direct labor hours = (2,152,000 / 25) + 10,000 - 5,000 = 95,060 hoursDirect labor cost = 95,060 hours x $17 = $1,616,020Therefore, the direct labor cost budgeted for November is $1,616,020.

It Takes 30 Minutes of Direct Labor Time to Make