Question

Sthilaire Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.36 direct labor-hours. The direct labor rate is $7.60 per direct labor-hour. The production budget calls for producing 2, 500 units in April and 2, 400 units in May. 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 960 hours in total each month even if there is not enough work to keep them busy.

Required: Construct the direct labor budget for the next two months. (Round "labor-hours per unit" & "labor cost per hour" answers to 2 decimal places.)

Answer 1

Answer and Explanation:

The answer is attached below

Answer 2

Labour Budget

April $7,296

May $7,296

Total = $ 14,592

Step-by-step explanation:

Labour Budget for Sthilaire Corporation

April May

Labour Hour (2,500× 0.36) 900 864 (2,400× 0.36)

× ×

Labour rate ($) 7.6 7.6

6,840 6,566.40

Guaranteed (960 × $ 7.60) $7,296 $7,296

Since the budgeted labour cost figures are less than the the guaranteed the company is bound by the agreement to pay the guaranteed minimum amount. Hence, the budgeted figures are:

April: $7,296

May : $7,296

Total $7,296 + $7,296 = $ 14,592