Question

Required information [The following information applies to the questions displayed below.] Shadee Corporation expects to sell 630 sun shades in May and 340 in June. Each shade sells for $139. Shadee's beginning and ending finished goods inventories for May are 75 and 60 shades, respectively. Ending finished goods inventory for June will be 65 shades. Suppose that each shade takes three direct labor hour to produce and Shadee pays its workers $15 per hour. Additionally, Shadee': ixed manufacturing overhead is $11,000 per month, and variable manufacturing overhead is $14 per unit produced. Required: 1. Prepare Shadee's direct labor budget for May and June.

Answer 1

The direct labor budget for May requires 1,845 labor hours amounting to $27,675, and for June, it requires 1,035 hours totaling $15,525, calculated by estimating the number of shades to be produced and the labor hours required at a cost of $15 per hour.

Step-by-step explanation:

Shadee Corporation's Direct Labor Budget for May and June

To calculate Shadee Corporation's direct labor budget for May and June, we need to estimate the total labor hours required and then multiply those hours by the labor cost per hour. First, we determine the production needs for shades by adding the desired ending finished goods to the sales units and subtracting the beginning inventory. For May, Shadee expects to sell 630 shades and wants to end with 60 shades in inventory, with a beginning inventory of 75 shades. This means they will need to produce (630 + 60 - 75) = 615 shades. In June, the expected sales are 340 shades with an ending inventory of 65 shades, and a beginning inventory of 60, leading to a production requirement of (340 + 65 - 60) = 345 shades.

Each shade requires three direct labor hours. Thus, the total labor hours needed for production in May are 615 shades * 3 hours/shade = 1,845 hours. For June, it's 345 shades * 3 hours/shade = 1,035 hours. At a rate of $15 per hour, the total direct labor cost for May would be 1,845 hours * $15/hour = $27,675. For June, it would be 1,035 hours * $15/hour = $15,525.

The direct labor budget provides a company with an estimate of the total cost of labor required to meet production goals and can help manage labor costs effectively as it allows for planning and adjustments as needed.