Question

Detmer Enterprises has the following budgeted sales:

                  Budgeted Sales in Units
June                   6,800 units
July                   5,100 units
August                 4,400 units
September              7,300 units

Past experience has shown that the ending finished goods inventory for
each month should be equal to 20% of the next month's expected sales in
units. Additionally, it is known that every unit produced requires four
direct labor hours to make and direct laborers are paid $15 per hour.

Assume that Detmer pays 65% of its direct labor in the same month the
employee works, pays 30% of its direct labor in the month after the
employee works, and the final 5% is paid two months after the employee
works.

Calculate the budgeted cash payments for direct labor for the month of
August.

Answer 1

	June	July	August
Budgeted Sales in Units	6800	5100	4400
Add: Desired ending finished goods inventory	1020	880	1460
Total needs	7820	5980	5860
Less: Beginning finished goods inventory	1360	1020	880
Required production in units	6460	4960	4980
Direct labor hours per unit	4	4	4
Total direct labor hours	25840	19840	19920
Wager rate per hour	15	15	15
Total direct labor cost	387600	297600	298800
Budgeted cash payment for direct labor=(387600*5%)+(297600*30%)+(298800*65%)= $302880