Question

Nevis' production data for a new deluxe product were taken from the most recent quarterly production budget:

July August September
Planned production in units 1,000 1,100 980
In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe unit. Nevis' cost per labor hour is $15.
Required:
1. Direct labor cost for the quarter would be budgeted at:
A) $553,950.
B) $533,125.
C) $547,750.
D) $519,075.
E) None of the answers is correct.

Answer 1

$553,950

Step-by-step explanation:

Direct labor cost is the expense incurred in producing goods for sale. It is the wages and salaries paid to factory workers.

For Nevi productions, the deluxe product requirements 2.25 direct hours

Budget in units for the quarter is 1000+ 1100 +980=3,080

total labor hours required = 3,080 x 2.25

=6,930

For the standard product, monthly production is 5000 units.

budget for the quarter will be 5000 units x 3 months

=15,000 units

total labor hours required = 15,000 x 2 hours

=30,000 hours

total labor hours for entire production will be 6,930 + 30,000

=36, 930

Cost per hour is $15

Total direct labor

=36,930 x 15

=$553,950