Question

LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 5 hours of direct labor at the rate of $10 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. The company plans to sell 40,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 200 and 100 units, respectively. Budgeted direct labor costs for June would be: a) $1,984,325 b) $1,974,175 c) $1,995,000 d) $564,050

Answer 1

• All working forms part of the answer
• Units to be produced

Units to be sold	40000
Add: Inventory on 30 June	100
Total needs	40100
Less: Beginning Inventory on 1 June	200
Total Units to be produced	39900

• Answer calculation

A	Labor hours required per unit	5
B	Total Units to be produced	39900
C=A x B	Total Labor hours required	199500
D	Direct Labor hour rate per hour	$                10.00
E = C x D	Total Direct labor Cost [199500 x $10]	$ 1,995,000.00

• Hence, correct answer is Option ‘C’: $ 1,995,000.00