Question

Nevis' production data for a new deluxe product were taken from the most recent quarterly production budget:July August SeptemberPlanned production in units 1,000 1,100 980In 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. 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

Total labour budget for the quarter = $553,950

Step-by-step explanation:

Direct labor cost budget is prepared using the production budget.

It is prepared as follows:

Direct labour budget = budgeted labour hours × labour cost per hour

Budgeted labour hours = Budgeted production unit × labour hours per unit

Budgeted labour hours:

Deluxe - (1,000+1,100+980) × 2.25 hours = 6,160 hours

Standard- (5000 × 3) × 2 hrs = 30,000 hours

Total labor hours = 30,000 +6,160 = 36,930 hours

Total labor budget for the quarter

= 36,930 hours × $15 = $553,950

Total labor budget for the quarter =$553,950