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

Question

Veltrj Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.71 direct labor-hours. The direct labor rate is $11.40 per direct labor-hour. The production budget calls for producing 6,700 units in October and 6,500 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? SmallCircle $124.944.00 SmallCircle $126.711.00 SmallCircle $106.840.80 SmallCircle $115.083.00

Explanation / Answer

Oct production hours = 6700 * 0.71 hours = 4757 DLH

Nov production hours = 6500 * 0.71 hours = 4615 DLH

So, the committed cost of DL for the two months = 5480 * 2 * 11.40 = $124,944.00 (option 1st)

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