Question

Required Information (The following information applies to the questions displayed below) Morganton Company makes one product and it provided the following Information to help prepare the master budget: a. The budgeted selling price per unit is $60. Budgeted unit sales for June, July, August, and September are 9,200, 23,000, 25.000, and 26.000 units, respectively. All sales are on credit. b. Thirty percent of credit sales are collected in the month of the sale and 70% In the following month. C. The ending finished goods Inventory equals 20% of the following month's unit sales. d. The ending raw materials Inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.50 per pound. e. Thirty percent of raw materials purchases are paid for in the month of purchase and 70% in the following month. 1. The direct labor wage rate is $13 per hour. Each unit of finished goods requires two direct labor-hours g. The variable selling and administrative expense per unit sold is $1.80. The fixed selling and administrative expense per month is $62,000. 10. What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced? Total direct labor cost

Answer 1

Calculate total direct labor hour as follows:

	A	B
1		July
2	Budgeted sales	23000
3	Add: Required ending inventory of finished goods	5000
4	Total units required	28000
5	Less: Beginning inventory of finished goods	4600
6	Units to be produced	23400
7	Direct labor hours required per unit	2
8	Number of direct labor hours required for budgeted production	46800
9	Wage rate per direct labor hour	13
10	Total direct labor cost	608400

Therefore,

Total direct labor cost = $608,400

Above figures have been calculated in the following manner:

	July
Budgeted sales	23000
Add: Required ending inventory of finished goods	=25000*0.2
Total units required	=B2+B3
Less: Beginning inventory of finished goods	=23000*0.2
Units to be produced	=B4-B5
Direct labor hours required per unit	2
Number of direct labor hours required for budgeted production	=B6*B7
Wage rate per direct labor hour	13
Total direct labor cost	=B8*B9