If budgeted direct labor hours are 4550 and the direct labor rate is $600 per hour, the total direct labor cost is _____________?
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Answer: C. $2,730,000
Explanation
Total direct labor cost is calculated by multiplying budgeted direct labor hours by the direct labor rate. Multiplying 4550 budgeted hours by the rate of 600 per hour results in the correct total cost of 2730000. Standard labor budgeting formulas confirm that multiplying hours by the rate yields total labor expense. Direct labor budgets outline the expected labor hours and wage costs required to achieve planned production volume. Wage rates incorporate basic pay, fringe benefits, and payroll taxes associated with manufacturing personnel. Accurate labor cost projections are essential for maintaining overall manufacturing cost control and profitability.
Human resources and production managers use labor budgets to plan workforce hiring, training, and shift schedules. Comparing budgeted labor costs against actual payroll expenses helps companies identify labor inefficiencies quickly. Proper labor budgeting ensures that manufacturing operations have adequate staffing without incurring excessive costs. Incorrect options display arithmetic multiplication errors or incorrect decimal placements for the total cost. Other choices confuse direct labor calculations with material or overhead budgeting formulas. Selecting wrong numbers demonstrates unfamiliarity with standard labor budget computations.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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