Question

1. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 8,900, 20,000, 22,000, and 23,000 units, respectively. All sales are on credit.
2. Forty percent of credit sales are collected in the month of the sale and 60% in the following month.
3. The ending finished goods inventory equals 20% of the following month’s unit sales.
4. The ending raw materials inventory equals 10% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.50 per pound.
5. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month.
6. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours.
7. The variable selling and administrative expense per unit sold is $1.50. The fixed selling and administrative expense per month is $70,000.

What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?

Answer 1

What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?

Required production in units	20400
Direct labor hours per unit	2
Total direct labor-hours needed (a)	40800
Direct labor cost per hour (b)	13
Total direct labor cost (a) × (b)	530400

Workings

	July
Sales	20000
Desired ending Inventory	4400
total Needs	24400
Less Beginning Inventory	4000
Required production in units		20400