alleryStart learning →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_
Keep practising Budgeting
Browse all Budgeting questions for US CMA Part 1, or explore more Management Accounting topics.
Related questions
What does a capital expenditure budget list?What does the cash budget estimate?Budgeted gross profit is $490,460, selling and administrative expenses are $228,100 and thA company budgets 2,600 bicycle helmets at $50 each and 4,800 ski helmets at $130 each. WhWhich budget must be completed before the production budget can be prepared?The cash budget and the capital expenditures budget are included on which statement?What is a master budget?What does a flexible budget provide that a static budget does not?