Question

WellWheats, Inc. produces breakfast cereal and sells each box, or unit, for $7. The company is projecting sales of 1,000 units for the month of March. There are 30 units in the beginning inventory. Each unit requires 20 ounces of raw materials and 0.20 direct labor hours to make. The company's policy is to keep ending finished goods inventory of 10% of the current month's sales. Selling and administrative expenses for the month have been budgeted at $2,000. If the direct labor cost per hour is $0.75, calculate the budgeted direct labor cost for the month of March.
A. $214.00
B. $160.50
C. $802.50
D. $236.00

Answer 1

Answer:

b. . $160.50

Explanation:

Projected Sales 1,000 units

Desired ending inventory = 10%*1,000 = 100 units

Beginning Inventory = 30 units

Required production = Projected Sales + Desired ending inventory - Beginning Inventory

Required production = 1,000 units + (10%*1,000 units) - 30 units

Required production = 1,000 units + 100 units - 30 units

Required production = 1,070 units

Labor hours per unit = 0.20

Cost per labor hour = $0.75

Budgeted labor cost for March = Required production*Labor hours per unit*Cost per labor hour

Budgeted labor cost for March = 1,070 units*$0.20*$0.75

Budgeted labor cost for March = $160.50

Hence, the budgeted labor cost for March is $160.50.