Question

ABC Company produces water pumps. The unit sales for the first four months of the year for this product are as follows:

Unit Sales:

January 162,000

February 198,000

March 180,000

April 216,000

Company maintains ending inventory for each month at 25% of next month's sales. However, at the beginning of January, due to greater sales in December than anticipated, the beginning inventory for January is   18,900

Required:

a) Compute the total number of units that should be produced for the months of January, February and March. Find the Total units to be produced for the 1st quarter

b) ABC Company makes wallets and the planned production in units for the first three months of the following year are:

January 21,900

February 20,500

March 25,100

Additional information is as follows:

Average wage per hour $21.60

Direct labor hour for each wallet 0.45

What is the total direct labour budget for the first quarter

c) Compute the total direct labour budget for the first quarter of the following year.

Answer 1

a.

particulars	january	february	march	april
sales	162000	198000	180000	216000
25% stock for next month	49500	45000	54000
total units required	211500	243000	234000	216000
less:opening stock	18900	49500	45000	54000
units to be produced	192600	193500	189000	162000

units to be produced in first quarter=sum of monthly production of january,february and march

ie 192600+193500+189000=575100 units

b.TOTAL DIRECT LABOUR HOURS IS AS FOLLOWS

particulars	january	february	march
estimated wallet production(A)	21900	20500	25100
labour hour per wallet(B)	0.45	0.45	0.45
total labour hours(C=A*B)	9855	9225	11295

C.TOTAL LABOUR BUDGET FOR THE QUARTER

particulars	january	february	march
total labour hours	9855	9225	11295
wage rate per hour(D)	$21.60	$21.60	$21.60
total wages budgetted(C*D)	$212,868.00	$199,260.00	$243,972.00