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A company will produce 1,000 statues, each needing 5 hours of direct labor at $10 per hour. What is total budgeted direct labor cost?
A$5,000
B$50,000
C$10,000
D$60,000
Answer & Solution
Correct answer: B. $50,000
1. The direct labor cost budget begins with units to be produced, taken from the production budget.
2. Hours required are 1,000 units times 5 hours per unit, which is 5,000 hours.
3. Total direct labor cost is 5,000 hours times $10 per hour, which is $50,000.
4. $5,000 is the hour count, not a dollar amount, so it stops one step short.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.6 Sales Budget_
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