Morganton Company makes one product and it provided the following information to

Question

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 $65. Budgeted unit sales for June, July, August, and September are 8,400, 15,000, 17,000, and 18,000 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 30% of the following month's unit sales. d. The ending raw materials inventory equals 20% of the following month's raw materials production needs. Each unit of finished goods requires 5 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. f. The direct labor wage rate is $12 per hour. Each unit of finished goods requires two direct labor-hours g. The variable selling and administrative expense per unit sold is $1.60. The fixed selling and administrative expense per month is $65,000. Foundational 8-10 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

Explanation / Answer

Total Direct labour cost is $ 374,400 for July.

Explanation:

Budgeted production units for July Expected sales units in July 15000 Add: Desired ending Inventory for July 5100 (i.e. 17000 units *30%) Total Needs 20100 Less: beginning Inventory 4500 (i.e. 15000 units*30%) Budgeted production units of July 15600 Budgeted labour cost for July: Budgeted Production units of July 15600 labour hours per unit 2 Budgeted labour hours required in July 31200 labour cost per hour 12 Budgeted labour cost for July: 374400

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