Veltri Corporation is working on its direct labor budget for the next two months

Question

Veltri Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The production budget calls for producing 7,100 units in October and 6,900 units in November. 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?

$122,752.00

$120,736.00

$120,881.60

$122,606.40

a.

$122,752.00

b.

$120,736.00

c.

$120,881.60

d.

$122,606.40

Explanation / Answer

A. $122,752.00

Direct Labor Budget

October November Total Required production in units 7,100 6,900 Direct labor-hours per unit × 0.77 × 0.77 Total direct labor-hours needed 5,467 5,313 Minimum guaranteed paid labor-hours 5,480 5,480 Direct labor cost per hour × $11.20 × $11.20 Total direct labor cost $61,376 $61,376 $122,752

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