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Chapter 20: 5E (page 917)

The production budget for Manner Company shows units to be produced as follows: July, 620; August, 680; and September, 540. Each unit produced requires two hours of direct labor. The direct labor rate is currently \(20 per hour but is predicted to be \)21 per hour in September. Prepare a direct labor budget for the months July, August, and September.

Short Answer

Expert verified

The budgeted direct labor costs for the month of July, August and September will be$24,800, $27,200 and $22,680.

Step by step solution

01

Given the information as

The budgeted production for the month of July, August and September are 620, 680 and 540 units.

Each unit requires 2 hours of direct labor.

The direct labor hour rate in July and August is $20 and $21 in September.

02

Direct labor budget

Manner Company
Direct labor budget
For the month of July, August and September
Particulars	July	August	September
Budgeted production	620	680	540
Multiply: Labor hours	2	2	2
Total labor hours needed	1,240	1,360	1,080
Multiply: Direct labor rate	$20	$20	$21
Budgeted direct labor costs	$24,800	$27,200	$22,680

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Most popular questions from this chapter

For each of the following items 1 through 6, indicate yes if it describes a potential benefit of budgeting or no if it describes a potential negative outcome of budgeting.

6. Budgets can provide incentives for good performance.

Zortek Corp. budgets production of 400 units in January and 200 units in February. Each finished unit requires five pounds of raw material Z, which costs $2 per pound. Each month’s ending inventory of raw materials should be 40% of the following month’s budgeted production. The January 1 raw materials inventory has 130 pounds of Z.

Prepare a direct materials budget for January

Hardy Company’s cost of goods sold is consistently 60% of sales. The company plans ending merchandise inventory for each month equal to 20% of the next month’s budgeted cost of goods sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected sales are: August (actual), \(325,000; September (actual), \)320,000; October (estimated), \(250,000; and November (estimated), \)310,000. Use this information to determine October’s expected cash payments for purchases.

Scora, Inc., is preparing its master budget for the quarter ending March 31. It sells a single product for $50 per unit. Budgeted sales for the next three months follow. Prepare a sales budget for the months of January, February, and March.

How does budgeting help management coordinate and plan business activities?

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