Question

#3

Direct Labor Cost Budget

Ace Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for July for the two rackets is as follows:

	Junior	Pro Striker
Production budget	9,800 units	23,600 units

Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows:

	Forming Department	Assembly Department
Junior	0.2 hour per unit	0.4 hour per unit
Pro Striker	0.35 hour per unit	0.7 hour per unit

The direct labor rate for each department is as follows:

Forming Department	$18 per hour
Assembly Department	$8 per hour

Prepare the direct labor cost budget for July.

Ace Racket Company
Direct Labor Cost Budget
For the Month Ending July 31
	Forming Department	Assembly Department
Hours required for production:
Junior
Pro Striker
Total
Hourly rate	x$	x$
Total direct labor cost	$	$

Answer 1

	Ace racket company
	Direct labor cost budget
	For the month ending July 31
		Forming Department	Assembly Department
	Hours required for production
	Junior	1,960	3,920
	Pro striker	8,260	16,520
(a)	Total	10,220	20,440
(b)	Hourly rate	$ 18	$ 8
	Total direct labor cost (a) X (b)	$ 1,83,960	$ 1,63,520
	Workings
		Forming Department	Assembly Department
	Hours required for production
	Junior	(9,800 units X $0.2)	(9,800 units X $0.4)
		1,960	3,920
	Pro striker	(23,600 units X $0.35)	(23,600 units X $0.7)
		8,260	16,520