Question

Crane, Inc., is preparing its direct labor budget for 2020 from the following production budget based on a calendar year.

Quarter Units Quarter Units
1 20,330 3 35,270
2 25,370 4 30,390
Each unit requires 1.70 hours of direct labor. Prepare a direct labor budget for 2020. Wage rates are expected to be $17 for the first 2 quarters and $19 for quarters 3 and 4.

Answer 1

Total labor hour = Units*Operating hours

Labor cost= Total labor hours * Hourly wage rate

QUARTER

1 2 3 4

Units 20,330 35,270 25,370 30,390

DLH time per unit 1.70 1.70 1.70 1.70

Total labour hours need 34561 43129 59959 51663

Hourly wage rate 17 17 19 19

Budgeted direct labor hour 587535 733193 1138221 981597