If it takes 6 direct labor hours to produce a motor and if direct labor is payed

Question

If it takes 6 direct labor hours to produce a motor and if direct labor is payed $5 per hour, what is the budgeted direct labor cost if 80 motors are budgeted for production? a. $480 b. $400 c. $2000 d. $2480 e. None of the above A company has cash receipts of $430,000 and cash disbursements $405,000. The companies beginning cash was $21,000. If the company must maintain a minimum $50,000 cash balance, how much must the company borrow? a. $4,000 b. $25,000 c. $46,000 d. $54,000 Which would likely be prepared last? a. Operating budget b. Production budget c. Sales budget d. Cash Budget Which cost would most likely include both a variable and fixed cost element? a. Direct labor b. Manufacturing Overhead c. Direct Material d. Administrator salaries

Explanation / Answer

1. Budgeted Labor Cost = No. of Motors * Hours Required * Pay per hour

Budgeted Labor Cost = 80 * 6 * 5

Budgeted Labor Cost = $2400 (Option E - None of the above)

2. Closing Cash Balance = Opening Cash Balance+ Cash Receipts- Cash Disbursements

Closing Cash Balance = $21000+ $430000- $405000

Closing Cash Balance = $46000

The Amount company must borrow = Minimum Balance - Closing Cash Balance

The Amount company must borrow = $50000 - $46000

The Amount company must borrow = $4000 Option A

3. Option D. Cash Budget because it requires information from all the other budgets mentioned in options

4. Option B. Manufacturing Overhead includes Variable costs likes indirect labor, indirect material and fixed cost elements like Factory rent.

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