Question

Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.75 direct labor-hours. The direct labor rate is $10.00 per direct labor-hour. The production budget calls for producing 7,100 units in April and 6,900 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 5,480 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months?

Answer 1

The correct answer is $109,600.

Step-by-step explanation:

According to the scenario, the computation for the given data are as follows:

First we calculate the hours required in production.

So, Hours required in April = 7,100 × 0.75 = 5,325 hours

And hours required in May = 6,900 × 0.75 = 5,175 hours.

As Company has to pay for a minimum hours of 5,480 and the hours required in April and may is less than the minimum hours.

So, company will pay for Minimum hours.

We can calculate the total combined direct labor cost by using following formula:

Total combined direct labor cost = 5,480 hours × $10 × 2 months

= $109,600.