Question

Flagstaff Company has budgeted production units of 8,600 for July and 8,800 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $22 per hour. The total cost of direct labor budgeted for the month of August is:

Multiple Choice

• $94,600.

• $4,400.

• $96,800.

• $4,300.

• $191,400.
  
  

  Justin Company's budget includes the following credit sales for the current year: September, $28,000; October, $39,000; November, $33,000; December, $35,000. Credit sales are collected as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Justin expect to collect in November as a result of current and past credit sales?

  Multiple Choice

• $31,350.

• $33,950.

• $22,550.

• $33,000.

• $36,750.

Answer 1

Solution:

1. $96,800

2. $33,950

Explanation:

1.

	July	August
Budgeted production units	8,600	8,800
Labor requirement per unit(hours)	0.50	0.50
Total labor hours needed	4,300 (8600 x 0.50)	4,400 (8800 x 0.50)
labor rate per hour	$22	$22
labor cost	$94,600 (4300 x 22)	$96,800 (4400 x 22)

2.

	September	October	November	December
sales	$28,000	$39,000	$33,000	$35,000
			(28,000 x 20%) = 5600
			(39,000 x 60%) = 23,400
			(33,000 x 15%) = 4,950
collected cash in november			$33,950 (5600+23400+4950)