Whitmer Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $8.00 per direct labor-hour. The production budget calls for producing 5,400 units in February and 5,900 units in March.

Construct the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.

1. February – Budgeted direct labor hours = 378; Budgeted direct labor cost = $3,024.

2. March – Budgeted direct labor hours = 413; Budgeted direct labor cost = $3,304.

Explanation:

1. February direct labor budget:

a. Number of direct labor-hours budgeted for February = 0.07 * 5,400 = 378 labor hours

b. February budgeted direct labor cost = 378 * $8.00 = $3,024

2. March direct labor budget:

a. Number of direct labor-hours budgeted March = 0.07 * 5,900 = 413 labor hours

b. March budgeted direct labor cost = 413 * $8.00 = $3,304.00

Explanation:

    Selling Price  Commission   Shipping       NRV                   Cost

A         220       220*10% = 22     200*5% = 10  (220-22-10) 188   200

B         260        260*10%=26       240*5%=12  (260-26-12) 222    240

C         240        240*10%=24        120*5%=6      (240-24-6) 210    120

D         300        300*10%=30        160*5%=8    (300-30-8) 262     160

E         140          140*10%= 14         100*5%=5    (140-14-5) 121        100

Therefore ,the unit inventory valuation at lower of cost or net realizable value =

Products         Valuation

A                           188

B                           222

C                           120

D                           160

E                            100