Question

Morie Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.80 direct labor-hours. The direct labor rate is $8.80 per direct labor-hour. The production budget calls for producing 1,820 units in March and 2,040 units in April. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 1,760 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months?

Answer 1

Answer: $30,976

Explanation: we can conclude that as follows :-

labor cost = (no. of units) * (hours for each unit) * (per unit cost)

Therefore, In march :-

labor cost = (2,040 units) * (0.8 hrs) * ( $8.80)

= $14,361.6

In april :-

labor cost = (1820 units) * (0.8 hrs) * ( $8.80)

= $12,812

Now,

minimum cost = (1760 hrs) * ($8.8) = $15,488

Hence company has to pay minimum cost as per agreement, therefore :_

combined cost = $15,488 + $15,488 = $30,976