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 0.77 direct labor-hours. The direct labor rate is $10.10 per direct labor-hour. The production budget calls for producing 6,900 units in March and 6,700 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?

Explanation / Answer

Proudction hours = (6900+6700)*.77 = 10472 hour

Guaranteed hour = (5480*2) = 10960 hour

So direct labour cost for two months is (10960*10.10) = 110696

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