Question

Answer the following questions using the information below:

Shamokin Manufacturing produces a Tourbillon watch movement called OM362. Shamokin expects to sell 10,000 units of OM362 and to have an ending finished inventory of 2,000 units. Currently, it has a beginning finished inventory of 800 units. Each unit of OM362 requires two labor operations, one labor hour of assembling and two labor hours of polishing. The direct labor rate for assembling is $10 per assembling hour and the direct labor rate for polishing is $12.50 per polishing hour.

*48) The expected cost of direct labor for OM362 is ________.*
A) $350,000
B) $378,000
C) $392,000
D) $420,000

Answer 1

The expected cost of direct labor for the production of 11,200 OM362 units, given the labor rates and hours required for assembling and polishing, is calculated to be $392,000.

Step-by-step explanation:

The expected cost of direct labor for producing the OM362 unit can be calculated by determining the total labor hours required for assembling and polishing and then multiplying these hours by their respective direct labor rates. The student's question involves the production and labor costs associated with manufacturing a specific product.

To begin, we need to calculate the total number of units Shamokin Manufacturing needs to produce to meet the sales expectations and the required finished inventory level:

• Total units to be produced = Units sold + Ending inventory - Beginning inventory
• Total units to be produced = 10,000 units + 2,000 units - 800 units = 11,200 units

Next, we calculate the total labor hours for assembling:

• Total assembling hours = 11,200 units * 1 hour/unit = 11,200 hours

And the total labor hours for polishing:

• Total polishing hours = 11,200 units * 2 hours/unit = 22,400 hours

Now we can calculate the direct labor costs for each operation:

• Cost for assembling = 11,200 hours * $10/hour = $112,000
• Cost for polishing = 22,400 hours * $12.50/hour = $280,000

The sum of these costs gives us the total expected direct labor cost:

• Total expected direct labor cost = Cost for assembling + Cost for polishing
• Total expected direct labor cost = $112,000 + $280,000 = $392,000

Therefore, the correct answer to the question is option C) $392,000.