The following are budgeted data: .............................Sales (units).....

Question

The following are budgeted data:

.............................Sales (units).....Production(units)
April.........................12,000..............15,000
May..........................17,000..............16,000
June.........................15,000..............13,000

Each unit requires 0.75 hours of direct labor at a cost of $6.50 per hour. What is the cost of direct labor for May?

a. $73,125 b. $82,875 c. $63,375 d. $78,000

Not sure how to do this, if I figure it by using 17,000 (sales)...then I get answer B, but if I use 16,000 (production)...then I get answer D....how do I know which one to do?

Explanation / Answer

Answer is D. This is because cost of direct labour is always taken on total production done, not on the sales. So, answer is by taking 16,000, i.e part D.

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