Answer:
$225,680; $305,970; $327,670
Explanation:
Given that,
Sales budget for the next four months:
July = 5,000 units
August = 7,000 units
September = 7,500 units
October = 8,000 units
Wages of unskilled labor = $8 per hour
Wages of skilled labor = $15 per hour
Each handbag requires: 1.3 hours of unskilled labor and 2.2 hours of skilled labor.
Therefore, the beginning inventory is the ending inventory of the previous month.
Firstly, we need to find out the production level for each of the month then we are able to calculate the total labor cost at this production level.
For the month of July:
Production for the month of July:
= Sales + Ending inventory - Beginning inventory
= 5,000 + (10% × 7,000) - (10% × 5,000)
= 5,000 + 700 - 500
= 5,200
Total labor cost:
= Unskilled labor cost + Skilled labor cost
= ($8 per hour × 1.3 hours × 5,200) + ($15 per hour × 2.2 hours × 5,200)
= $54,080 + $171,600
= $225,680
For the month of August:
Production for the month of August:
= Sales + Ending inventory - Beginning inventory
= 7,000 + (10% × 7,500) - (10% × 7,000)
= 7,000 + 750 - 700
= 7,050
Total labor cost:
= Unskilled labor cost + Skilled labor cost
= ($8 per hour × 1.3 hours × 7,050) + ($15 per hour × 2.2 hours × 7,050)
= $73,320 + $232,650
= $305,970
For the month of September:
Production for the month of September:
= Sales + Ending inventory - Beginning inventory
= 7,500 + (10% × 8,000) - (10% × 7,500)
= 7,500 + 800 - 750
= 7,550
Total labor cost:
= Unskilled labor cost + Skilled labor cost
= ($8 per hour × 1.3 hours × 7,550) + ($15 per hour × 2.2 hours × 7,550)
= $78,520 + $249,150
= $327,670
