Solved Question: Tangshang Industries production budget from the 2nd quarter of 2018

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Question:

Tangshang Industries production budget from the 2nd quarter of 2018, projected the following amounts of units to be produced:

April 1,000 units

May    1,200 units

June    1,250 units

Each unit requires 2 parts of component A and 3 parts of component B. Component A cost is $1.25 per unit and component B cost is $.80 per unit.

Each unit requires the following labor:

2 hours in the processing department

1 hour in the assembly department

Processing department labor rate is $4/hour

Assembly department labor rate is $6/hour

Using the information from the production budget of Tangshang Industries

A. Calculate Total Direct Labor Cost in the processing department for the quarter April – June 2018.

B. Calculate Total Direct Labor Cost for June 2018.

C. Calculate Total Direct Labor Cost for the quarter April – June 2018.

Answer:

April May June Quarter
No of budgeted units 1,000 1,200 1,250 3,450
x Processing hours per unit 2 2 2 2
Total processing labor hours 2,000 2,400 2,500 6,900
x Processing labor cost per hour $ 4 $ 4 $ 4 $ 4
Total processing labor cost $ 8,000 $ 9,600 $ 10,000 $ 27,600
Assembling hours per unit 1 1 1 1
Total assembling labor hours 1,000 1,200 1,250 3,450
x Assembling cost per hour $ 6 $ 6 $   6 $ 6
Total assembling labor cost $ 6,000 $ 7,200 $   7,500 $   20,700
Total direct labor cost $ 14,000 $ 16,800 $ 17,500 $   48,300

A) Total direct labor cost for processing department in the quarter

= $ 8,000 + $ 9,600 + $ 10,000 = $ 27,600

B) Total direct labor cost for June = Labor cost in processing + labor cost in assembling

= $ 10,000 + $ 7,500 = $ 17,500

C) Total Direct Labor Cost for the quarter = Labor cost in processing for the quarter + labor cost in assembling for the quarter

= ($ 8,000 + $ 9,600 + $ 10,000) + ($ 6,000 + $ 7,200 + $ 7,500)

= $ 27,600 + $ 20,700 = $ 48,300

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