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In: Accounting

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,600...

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,600 units, August 7,800, September 8,300, October 8,100. Jaybird Inc.’s ending finished goods inventory policy is 10% of the following month’s sales. Each handbag requires 1.6 hours of unskilled labor (paid $15 per hour) and 2.2 hours of skilled labor (paid $22 per hour). What will be the total labor cost for the month of August?

  • $488,050

  • $568,340

  • $29,830

  • $566,170

Solutions

Expert Solution

Answer: $568,340

.

.

Calculation of total labor cost for the month of August
labor cost for unskilled labor
     Units to be produced during August    [Refer working note]            (a) 7,850
     labor hours per unit                                                                          (b) 1.60
     Total skilled labor hours needed                                                      (c = a x b) 12,560
      labor cost per hour                                                                            (d) $15
      Total labor cost for unskilled labor                                                   (e = c x d) $188,400
labor cost for skilled labor
     Units to be produced during August    [Refer working note]            (f) 7,850
     labor hours per unit                                                                          (g) 2.20
     Total skilled labor hours needed                                                      (h = f x g) 17,270
      labor cost per hour                                                                            (i) $22
      Total labor cost for skilled labor                                                   (j = h x i) $379,940
Total labor cost                                                                                      (e + j) $568,340

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Working note - Computation of units to be produced during August
Budgeted sales in August 7,800
Add: Desired ending inventory   [September sales x 10% = 8,300 x 10%] 830
Total needs 8,630
Less: Beginning inventory           [ = Ending inventory for July = August sales x 10% = 7,800 x 10%] 780
Units to be produced 7,850

ekkarill92 answered 2 years ago
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