Pooler Corporation is working on its direct labor budget for the next two months
ID: 2544620 • Letter: P
Question
Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.77 direct labor-hours. The direct labor rate is $11.10 per direct labor-hour. The production budget calls for producing 7,000 units in April and 6,800 units in May. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 5,480 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months?
Multiple Choice
$118,947.60
$117,948.60
$121,656.00
$133,599.60
Explanation / Answer
Solution = $ 1,21,656.00
Direct labor-hours needed for production in April = 0.77 × 7000 = 5390 Labour hours
Direct labor-hours needed for production in May = 0.77 × 6800 = 5236 Labour hours
Even though both months’ production needs would require less than 5480 hours, the company has committed to paying a minimum of 5480 hours per month.
Total direct labor-hours = 5,480 + 5,480 = 10,960 Labour hours
Direct labor cost = 10,960 × $ 11.10 = $ 1,21,656