Question

Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 3.0 direct labor-hours. The estimated direct labor cost for August is closest to:

a. $222,300
b. $33,300
c. $632,700
d. $666,900

Answer 1

The estimated direct labor cost for August is closest to $632,700.

Step-by-step explanation:

The estimated direct labor cost for August can be calculated by multiplying the budgeted unit sales for August by the direct labor-hours required per unit and the direct labor wage rate.

For August, the budgeted unit sales are 11,100 units and each unit requires 3.0 direct labor-hours. Therefore, the total direct labor-hours for August would be 11,100 units × 3.0 direct labor-hours/unit = 33,300 direct labor-hours.

The direct labor cost is calculated by multiplying the total direct labor-hours by the direct labor wage rate: 33,300 direct labor-hours × $19.00/hr = $632,700.

Therefore, the estimated direct labor cost for August is closest to $632,700.

Answer 2

The estimated direct labor cost for August is found by calculating the units that need to be produced in August to meet sales and inventory requirements, which is then multiplied by the labor hours per unit and the direct labor wage rate. The correct cost is not listed in the provided options, but the calculation method is correct.

Step-by-step explanation:

To calculate the estimated direct labor cost for August, we first need to determine the number of finished goods that Pabon Corporation has to produce to meet the desired inventory level. The desired ending inventory for August is 40% of September's sales. September's budgeted sales are 12,600 units, so the ending inventory for August should be:
40% * 12,600 units = 5,040 units

Next, we add August's sales to this ending inventory to find the total number of units that need to be produced in August:
11,100 units (August sales) + 5,040 units (Ending inventory) = 16,140 units

For the direct labor cost, we know that each unit requires 3.0 direct labor-hours, and the direct labor wage rate is $19.00 per hour. So, the total direct labor cost will be:
16,140 units * 3.0 hours/unit * $19.00/hour
Calculating this gives us:

$920,340

Therefore, the closest estimated direct labor cost for August is $920,340, but this option is not listed. However, it is important to make sure calculations are done correctly. If the student made an error in providing answer options or there is additional context that would affect the computation, please provide the accurate information so the calculation can be revisited.