Question for you guys from Becker: B2- 68/132 / CPA2013-04022
Jordan Auto has developed the following production plan.
Month Units
January 10,000
February 8,000
March 9,000
April 12,000
Each unit contains three pounds of raw material. The desired raw material ending inventory each month is 120 percent of the next month's production, plus 500 pounds. (The beginning inventory meets this requirement.) Jordan has developed the following direct labor standards for production of these units.
Department 1 Department 2
Hours per unit 2.0 0.5
Hourly rate $6.75 $12.00
Jordan Auto's total budgeted direct labor dollars for February usage should be:
a. $156,000
b. $210,600
c. $175,500
d. $165,750
Explanation
Choice “a” is correct. $156,000 budgeted direct labor dollars for February, calculated as follows:
8,000 units × 2.0 hrs × $6.75 = $ 108,000
8,000 units × 0.5 hrs × $12.00 = 48,000
Total budgeted direct labor dollars for February $ 156,000
What I don't understand is why you don't calculate what they are required to produce first and then use the information about the labor hours and rates?
What I did was:
Beg Inv: 8000*1.2 + 500 = 10,100
End Inv: 9000*1.2 + 500 = 11,300
Production = 8,000 +11,300 – 10,100 = 9,200
9,200 units × 2.0 hrs × $6.75 = $ 124,200
9,200 units × 0.5 hrs × $12.00 = 55,200
Total: 179,400 – which obviously isn't an option
FAR: 87 - 2/19/13
REG: 91 - 4/2/13
AUD: 99 - 5/2/13
BEC: 87 - 5/30/13
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