Illescas Corporation manufactures and sells a single product. The company uses u

Question

Illescas Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During December, the company budgeted for 6,400 units, but its actual level of activity was 6,440 units. The company has provided the following data concerning the formulas to be used in its budgeting:

The direct labor in the planning budget for December would be closest to:

$40,412

$40,572

$40,161

$40,320

Please show your detailed work! Thanks.

Fixed element per month Variable element per unit Revenue $32.50 Direct labor $0 $6.30 Direct materials 0 8.70 Manufacturing overhead 48,600 1.70 Selling and administrative expenses   29,100     0.70 Total expenses $77,700 $17.40

Explanation / Answer

direct labour = fixed cost + (variable cost perunit * quantity)

direct labour= 0 + (6.30 * 6400) = 40320

answer is $40,320

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