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23 May, 15:52

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

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  1. 23 May, 16:35
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    (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
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