Question

BE9.5 (LO 3), AP For Gundy Company, units to be produced are 5,000 in quarter 1 and 7,000 in quarter 2. It takes 1.6 hours to make a finished unit, and the expected hourly wage rate is $15 per hour.

Prepare a direct labor budget by quarters for the 6 months ending June 30, 2020. Prepare a direct labor budget for 2 quarters.

Answer 1

Answer:

The correct answer for quarter 1 is $120,000, for quarter 2 is $168,000 and for 6 months is $288,000.

Explanation:

According to the scenario, computation of the given data are as follows:

Direct labor cost for Quarter 1 = Total Required Direct Labor Hours × Direct Labor Wage

Where, Total Required Direct Labor Hours = 5,000 × 1.6 hours = 8,000 hours

So, Direct labor budget for Quarter 1 = 8,000 × $15 = $120,000

Direct labor budget for Quarter 2 = Total Required Direct Labor Hours × Direct Labor Wage

Where, Total Required Direct Labor Hours = 7,000 × 1.6 hours = 11,200 hours

So, Direct labor budget for Quarter 2 = 11,200 × $15 = $168,000

So, Direct labor budget for 6 months = Direct labor budget for Quarter 1 + Direct labor budget for Quarter 2

= $120,000 + $168,000

= $288,000.