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

Question

Morie Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.76 direct labor-hours. The direct labor rate is $11.90 per direct labor-hour. The production budget calls for producing 6,800 units in March and 6,600 units in April. 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? $124,902.40 $130,424.00 $121,189.60 $138,230.40

Explanation / Answer

The direct labour hours required for the production budget in March and April is (6800 x 0.76) 5168 hours & (6600 x 0.76) 5016 hours respectively.

But the committed labour hours in each month is 5480.

Total Labour cost = (5480 x 2 months x $11.90)

= $130424

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