The LFG Corporation makes and sells a single product, Product T. Each unit of Product T requires 1.4 direct labor-hours at a rate of $9.80 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. LFG Corporation needs to prepare a Direct Labor Budget for the second quarter of next year. The company has budgeted to produce 24,000 units of Product T in June. The finished goods inventories on June 1 and June 30 were budgeted at 600 and 800 units, respectively. Budgeted direct labor costs for June would be:
A)$332,024
B)$329,280
C)$235,200
D)$326,536

Question

Quizplus · Accepted Answer

Direct labor-hours required per unit of Product T = 1.4
Direct labor cost per hour = $9.80
Budgeted production for June = 24,000 units

Direct labor-hours required for June production = 24,000 units × 1.4 hours per unit = 33,600 hours
Direct labor cost for June = 33,600 hours × $9.80 per hour = $329,280

The finished goods inventory increased by 200 units (800 - 600) from June 1 to June 30. Since each unit of Product T requires 1.4 direct labor-hours, this increase would require an additional 280 direct labor-hours (200 × 1.4). Therefore, the total direct labor-hours required for June would be 33,880 hours (33,600 + 280).

The direct labor budget for June would be $329,280 for 33,880 direct labor-hours, which gives us a direct labor cost of approximately $9.72 per hour.

Therefore, the budgeted direct labor costs for June would be $329,280. So, the best choice is B.

The LFG Corporation Makes and Sells a Single Product, Product