Question

Production and Direct Labor Cost Budgets

Levi Strauss & Co. manufactures slacks and jeans under a variety of brand names, such as Dockers^® and 501 Jeans^®. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the sales budget for Dockers and 501 Jeans shows estimated sales of 23,600 and 53,100 pairs, respectively, for May. The finished goods inventory is assumed as follows:

	Dockers		501 Jeans
May 1 estimated inventory	670		1,660
May 31 desired inventory	420		1,860

Assume the following direct labor data per 10 pairs of Dockers and 501 Jeans for four different sewing operations:

	Direct Labor per 10 Pairs
	Dockers		501 Jeans
Inseam	18	minutes	9	minutes
Outerseam	20		14
Pockets	6		9
Zipper	12		6
Total	56	minutes	38	minutes

a. Prepare a production budget for May. Prepare the budget in two columns: Dockers^® and 501 Jeans^®. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Levi Strauss & Co.
Production Budget
For the Month Ending May 31 (assumed data)
	Dockers®	501 Jeans®
Expected units to be sold
May 31 desired inventory
Total units available
May 1 estimated inventory
Total units to be produced

Feedback

Remember to take into account expected units to be sold, desired units in ending inventory and estimated units in beginning inventory when calculating total units to be produced.

b. Prepare the May direct labor cost budget for the four sewing operations, assuming a $13 wage per hour for the inseam and outerseam sewing operations and a $15 wage per hour for the pocket and zipper sewing operations. Prepare the direct labor cost budget in four columns: inseam, outerseam, pockets, and zipper.

Levi Strauss & Co.
Direct Labor Cost Budget
For the Month Ending May 31 (assumed data)
	Inseam	Outerseam	Pockets	Zipper	Total
Dockers®
501 Jeans®
Total minutes
Total direct labor hours
Direct labor rate	x $	x $	x $	x $
Total direct labor cost	$	$	$	$	$

Answer 1

a) Production Budget for month ending May 31 (in pairs)   

Levi Strauss & Co.
Production Budget
For the Month Ending May 31 (assumed data)
	Dockers®	501 Jeans®
Expected units to be sold	23,600	53,100
May 31 desired inventory	420	1,860
Total units available	24,020	54,960
May 1 estimated inventory	(670)	(1,660)
Total units to be produced	23,350	53,300

b) Direct Labor Cost Budget is shown as follows:-

Levi Strauss & Co.
Direct Labor Cost Budget
For the Month Ending May 31 (assumed data)
	Inseam	Outerseam	Pockets	Zipper	Total
Dockers®	42,030 (23,350*18 min/10 pairs)	46,700 (23,350*20 min/10 pairs)	14,010 (23,350*6 min/10 pairs)	28,020 (23,350*12 min/10 pairs)	130,760
501 Jeans®	47,970 (53,300*9 min/10 pairs)	74,620 (53,300*14 min/10 pairs)	47,970 (53,300*9 min/10 pairs)	31,980 (53,300*6 min/10 pairs)	202,540
Total minutes (A)	90,000	121,320	61,980	60,000	333,300
Total direct labor hours (A/60 Min per hour)	1,500 hrs	2,022 hrs	1,033	1,000	5,555
Direct labor rate	x $13	x $13	x $15	x $15
Total direct labor cost	$19,500	$26,286	$15,495	$15,000	$76,281

Notes:-

1) Minutes used per 10 pairs are given and therefore total minutes required for production is calculated by multiplying minutes given divided by 10 pairs.

2) Total minutes are converted in hours required by dividing total minutes by 60 minutes (as 1 hour = 60 minutes).