Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to:

(A) $222,300

(B) $29,250

(C) $389,000

(D) $555,750

Question

Martha Fox

Business

2 March, 06:15

Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to:

(A) $222,300

(B) $29,250

(C) $389,000

(D) $555,750

+4

Answers (1)

Know the Answer?

Helen Rice · Answer 1

(D) $555,750

Explanation:

The computation of the estimated direct cost is shown below:

= (Sales revenue - opening stock + beginning stock) * direct labor hours * direct labor wage rate

= ($11,100 - $4,440 + $5,040) * 2.5 hours * $19

= $11,700 * 2.5 hours * $19

= $555,750

The opening stock = August sales * given percentage

= $11,100 * 40%

= $4,440

The closing stock = September sales * given percentage

= $12,600 * 40%

= $5,040