Question

Angora Wraps of Pendleton, Oregon, makes fine sweaters out of pure angora wool. The business is seasonal, with the largest demand during the fall, the winter, and Christmas holidays. The company must increase production each summer to meet estimated demand.

  

The company has been analyzing its costs to determine which costs are fixed and variable for planning purposes. Below are data for the company’s activity and direct labor costs over the last year.

    

	Thousands of Units Produced	Number of Paid Days	Direct Labor Cost
Month
January	96	21	$	15,037
February	83	21	$	13,862
March	82	22	$	16,024
April	87	23	$	15,878
May	92	23	$	16,608
June	109	22	$	16,170
July	59	20	$	14,564
August	143	22	$	15,002
September	145	23	$	16,316
October	139	24	$	16,316
November	93	19	$	13,812
December	63	22	$	14,949

The number of workdays varies from month to month due to the number of weekdays, holidays, and days of vacation in the month. The paid days include paid vacations (in July) and paid holidays (in November and December). The number of units produced in a month varies depending on demand and the number of workdays in the month.

The company has eight workers who are classified as direct labor.

QUESTION: Please provide the direct labor cost, units produced, and number of days paid for January, February, March, April, May, June, July, August, September, October, November and December.

Answer 1

The Question by itself reveals the answer

However, the amount of Each

Months	Units Produced	Paid days	Labour Cost
January	96,000	21	15,037
February	83,000	21	13,862
March	82,000	22	16,024
April	87,000	23	15,878
May	92,000	23	16,608
June	109,000	22	16,170
July	59,000	20	14,564
August	143,000	22	15,002
September	145,000	23	16,316
October	139,000	24	16,316
November	93,000	19	13,812
December	63,000	22	13,812

The Solution can however be solved as per the requirement of ABC Costing

By Setting Parameters of labour Cost as days or as units produced

Direct labour cost can be ascertained as cost for each unit OR

Cost for each day for Particular month

Direct labour cost can be ascertained as cost for each unit

****** the calculation for labour cost in each month on the basis of units produced

###### The calculation for labour cost per month per labour on the basis of units produced

Months	Units Produced	Labour Cost	******	######
January	96,000	15,037	0.156635	0.019579
February	83,000	13,862	0.167012	0.020877
March	82,000	16,024	0.195415	0.024427
April	87,000	15,878	0.182506	0.022813
May	92,000	16,608	0.180522	0.022565
June	1,09,000	16,170	0.148349	0.018544
July	59,000	14,564	0.246847	0.030856
August	1,43,000	15,002	0.104909	0.013114
September	1,45,000	16,316	0.112524	0.014066
October	1,39,000	16,316	0.117381	0.014673
November	93,000	13,812	0.148516	0.018565
December	63,000	13,812	0.219238	0.027405

Cost for each day for Particular month

****** the calculation for labour cost in each month on the basis of number of days

###### The calculation for labour cost per month per labour on the basis of number of days

Months	Paid days	Labour Cost
January	21	15,037	716.0476	89.50595
February	21	13,862	660.0952	82.5119
March	22	16,024	728.3636	91.04545
April	23	15,878	690.3478	86.29348
May	23	16,608	722.087	90.26087
June	22	16,170	735	91.875
July	20	14,564	728.2	91.025
August	22	15,002	681.9091	85.23864
September	23	16,316	709.3913	88.67391
October	24	16,316	679.8333	84.97917
November	19	13,812	726.9474	90.86842
December	22	13,812	627.8182	78.47727