In budgeting direct labor hours for the coming year, it is important to
A) multiply production in units by the direct labor hours per unit.
B) divide production in units by the direct labor hours per unit.
C) subtract production in units from the direct labor hours per unit.
D) subtract direct labor hours per unit from production in units.
E) multiply production in units by the labor wage rate.

Question

Quizplus · Accepted Answer

To budget direct labor hours for the coming year, the production in units needs to be multiplied by the direct labor hours per unit. This will give an estimate of the total direct labor hours required for the production of the units. Dividing production in units by the direct labor hours per unit would give an estimate of the number of units that can be produced with a given number of direct labor hours, which is not the purpose of this budgeting exercise. Subtracting production in units from the direct labor hours per unit or vice versa would not provide a meaningful estimate of the required direct labor hours. Multiplying production in units by the labor wage rate would give an estimate of the total labor cost, but not the direct labor hours needed.

In Budgeting Direct Labor Hours for the Coming Year, It