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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct labor cost budget

MatchPoint Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for March for the two rackets is as follows:

  Junior Pro Striker
Production budget 2,200 units 7,000 units

Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows:

  Forming Department Assembly Department
Junior 0.10 hour per unit 020 hour per unit
Pro Striker 0.15 hour per unit 0.25 hour per unit

The direct labor rate for each department is as follows:

Forming Department $15.00 per hour
Assembly Department SI4.00 per hour

Prepare the direct labor cost budget for March.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

To Prepare: The direct labor cost budget of Company M.

Explanation

The following table shows the direct labor cost budget for forming department and assembly department.

Company M
Direct Labor Cost Budget
For the Month Ending March 31
Particulars

Forming

Department

Assembly

Department

Hours Required For Production:
     Junior 220 (1) 440 (2)
     Pro Striker 1,050 (3) 1,750 (4)
Total Hours Required (A) 1,270 2,190
Hourly Rate (B) $15 $14
Total Direct Labor Cost (A) × (B) $19,050 $30,660

Table (1)

Working Notes:

Calculate the hours required for the production of junior in forming department.

Hours required for production=2,200×0.10hr=220hrs (1)

Calculate the hours required for the production of junior in assembly department

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