Chapter 22, Problem 22.14EX

### Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Chapter
Section

### Accounting

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

# Production and direct labor cost budgetsLevi Strauss & Co. manufactures slacks and jeans under a variety of brand names, such as Dockers® and 501® Jeans. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the sales budget for Dockers and 501 Jeans shows estimated sales of 23,600 and 53,100 pairs, respectively, for May. The finished goods inventory is assumed as follows:   Dockers 501 Jeans May 1 estimated inventory 670 1,660 May 31 desired inventory 420 1,860 Assume the following direct labor data per 10 pairs of Dockers and 501 Jeans for four different sewing operations:   Direct Labor per 10 Pairs Dockers 501 Jeans Inseam 18 minutes 9 minutes Outerseam 20 14 Pockets 6 9 Zipper 12 6 Total 56 minutes 38 minutes   a.    Prepare a production budget for May. Prepare the budget in two columns: Dockers® and 501 Jeans®. b. Prepare the May direct labor cost budget for the four sewing operations, assuming a $13 wage per hour for the inseam and outerseam sewing operations and a$15 wage per hour for the pocket and zipper sewing operations. Prepare the direct labor cost budget in four columns: inseam, outerseam, pockets, and zipper.

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.

Production Budget shows the quantities of units that a company must produce to meet the budgeted sales and inventory.

To Prepare: The production budget and direct labor cost budget of Company L.

Explanation

(a)

The following table shows the production budget for D and 501 J.

 Company L Production Budget For the Month Ending May 31 Particulars Units D 501 J Expected units to be sold 23,600 53,100 Add: Desired inventory, June 30 420 1,860 Total Units Required 24,020 54,960 Less: Estimated Inventory, June 1 (670) (1,660) Total Units To Be Produced 23,350 53,300

Table (1)

Therefore, the total units to be produced for D and 501J are 23,350 and 53,300 respectively.

(b)

The following table shows the direct labor cost budget for inseam, outer-seam, pockets, and zipper.

 Company L Direct Labor Cost Budget For the Month Ending May 31 Particulars Inseam Outer-seam Pockets Zipper Minutes Required For Production: D 42,030 (1) 46,700 (2) 14,010 (3) 28,020 (4) 501 J 47,970 (5) 74,620 (6) 47,970 (7) 31,980(8) Total Minutes(A) 90,000 121,320 61,980 60,000 Total Hours Required (B) =(A)/60 1,500 2,022 1,033 1,000 Hourly Rate(C) $13$13 $15$15 Total (B) × (C) $19,500$26,286 $15,495$15,000 Total Direct Labor Cost 76,281

Table (1)

Working Notes:

Calculate the minutes required for the production of D in inseam.

Minutes required for production=23,35010pairs×18min=42,030mins (1)

Calculate the minutes required for the production of D in outer-seam.

Minutes required for production=23,35010pairs×20min=46,700mins (2)

Calculate the minutes required for the production of D in pockets

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