In: Accounting
A significant difference between the direct material purchases budget and the direct labor budget is that the direct material purchases budget
Group of answer choices
is constructed for each quarter, while the direct labor budget is constructed for each pay period.
considers beginning and ending inventory amounts, which are not part of the direct labor budget.
is based on units sold, while the direct labor budget is based on units produced.
is constructed from the top down, while the direct labor budget uses a bottom-up approach.
Answer:
Option B: Considers beginning and ending inventory, which is not part of the direct labor budget.
Explanation:
Direct Material Budget shows the raw material required in the budgeted period and the amount to be paid for such material.
Direct Labor Budget shows the number of hours required for the production and the amount paid for such hours.
Direct Material Budget considers opening and closing inventory whereas Direct Labor Budget does not.
The format of Direct Material Budget is:
Production required |
Material per unit |
Total material |
Add: Closing stock of Raw Material |
Total Requirement |
Less: Opening stock of Raw Material |
Purchases |
The format of Direct Labor Budget is:
Particulars |
Units to produce |
Multiply by: Direct labor per hours |
Hours needed |
Cost per hour |
Total budgeted direct labor cost |
Also, Material and Labor budgets can be constructed for any period
depending on the management.
Both these budgets are based on the units produced and both use a top-down approach.
Hence,
Option 'B' is correct and rest all are incorrect.
In case of any doubt, please feel free to comment.