Question

Hesterman Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations:

Budgeted selling price per unit	$	118
Budgeted unit sales (all on credit):
April		7,800
May		9,400
June		14,000
July		12,100

Raw materials requirement per unit of output		3	pounds
Raw materials cost	$	3.00	per pound
Direct labor requirement per unit of output		2.8	direct labor-hours
Direct labor wage rate	$	25.00	per direct labor-hour

Credit sales are collected:

40% in the month of the sale

60% in the following month

The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month’s raw materials production needs.

The estimated direct labor cost for May is closest to:

Multiple Choice

• $534,000

• $31,472

• $786,800

• $281,000

Answer 1

Correct answer--------$786,800

Working

	May
Expected Units sales	9400
Add: Desired Ending Finished Inventory	5600
Total Required Units	15000
Less : Beginning Finished Inventory	3760
Required Production units	11240

.

Units to be produced		11240
Direct labor hours per unit		2.8
Total labor hours required		31472
Rate per hour		$ 25.00
Total labor cost		$ 786,800.00