Question

Production and Direct Labor Cost Budgets

Two-Leg Company manufactures slacks and jeans under a variety of brand names, such as Dockers^® and 501 Jeans^®. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the sales budget for Dockers and 501 Jeans shows estimated sales of 40,130 and 71,500 pairs, respectively, for May. The finished goods inventory is assumed as follows:

	Dockers		501 Jeans
May 1 estimated inventory	1,790		2,020
May 31 desired inventory	660		2,520

Assume the following direct labor data per 10 pairs of Dockers and 501 Jeans for four different sewing operations:

	Direct Labor per 10 Pairs
	Dockers		501 Jeans
Inseam	18	minutes	12	minutes
Outerseam	22		15
Pockets	7		9
Zipper	10		6
Total	57	minutes	42	minutes

a. Prepare a production budget for May. Prepare the budget in two columns: Dockers^® and 501 Jeans^®. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Two-Leg Company
Production Budget
For Month Ending May 31 (assumed data)
	Dockers	501 Jeans
Expected units to be sold
Total units available
Total units to be produced

b. Prepare the May direct labor cost budget for the four sewing operations, assuming a $12 wage per hour for the inseam and outerseam sewing operations and a $16 wage per hour for the pocket and zipper sewing operations. Prepare the direct labor cost budget in four columns: inseam, outerseam, pockets, and zipper.

Two-Leg Company
Direct Labor Cost Budget
For Month Ending May 31 (assumed data)
	Inseam	Outerseam	Pockets	Zipper	Total
Dockers
501 Jeans
Total minutes
Total direct labor hours
Direct labor rate	x $	x $	x $	x $
Total direct labor cost	$	$	$	$	$

Answer 1

a)	Production Budget
	Particulars			Dockers	501 Jeans
	Expected units to be sold			40130	71500
Add:	May 31 desired inventory			660	2520
	Total units available			40790	74020
Less:	Total units available			1790	2020
	Total units to be produced			39000	72000

b)	Direct Labor Cost Budget
				Inseam	Outerseam	Pockets	Zipper	Total
	Dockers			70200	85800	27300	39000	222300
	501 Jeans			86400	108000	64800	43200	302400
	Total minutes			156600	193800	92100	82200	524700
	Total direct labor hours			2610	3230	1535	1370	8745
	Direct labor rate			$        12.00	$        12.00	$        16.00	$        16.00
	Total direct labor cost			$ 31,320.00	$ 38,760.00	$ 24,560.00	$ 21,920.00	$ 116,560.00

Workings: