Question

Good Eats Inc. manufactures flatware sets. The budgeted production is for 80,000 sets this year. Each set requires 2.5 hours to polish the material. If polishing labor costs $15 per hour, determine the direct labor cost budget for polishing for the year. $

Answer 1

Answer:

 Direct labor cost budget for polishing for the year   =  $3,000,000

Explanation:

The Direct Labour hours budgeted is based on the production budget. This is so because labour hours are required to achieve production. Therefore, in budget preparation, production budget is prepared before labour budget.

So we can apply same to Good Eats Inc as follows:

Step 1

Direct labour budget is determined as follows:

Labour budget in hours = Production unit × labour hours per unit

Labour hours = 80,000 ×  2.5 hours

                     = 200,000 hours

Step 2

Calculate the labour budget in Dollar:

Labour budget ($) = budgeted labour hours ×  cost per hour

Labour budget =  200,000 × $15

 

Direct labor cost budget for polishing for the year  =  $3,000,000