Questions: The following are the estimated monthly sales and desired ending finished goods inventories for Blushing Company for the fourth quarter ending December 31, as well as the month immediately before and after: September: 30,000 units, 8,000 units October: 40,000 units, 20% of next month's sales November: 50,000 units, 20% of next month's sales December: 60,000 units, 20% of next month's sales January: 20,000 units, 10% of next month's sales The unit selling price is 25. Materials cost per unit is 5. Direct labor required per unit is 0.1 hour. The direct labor rate is 20. The multiperiod direct labor cost budget for the fourth quarter should show the total direct labor cost for the quarter to be a. 355,000 b. 375,000 c. 3,650,000 d. 365,000

Solution Steps

To determine the total direct labor cost for the fourth quarter, we need to calculate the production requirements for each month and then compute the direct labor cost based on these requirements. The production requirement for each month is the sum of the sales for that month and the desired ending inventory, minus the beginning inventory. Once we have the production requirements, we can calculate the total direct labor hours needed and multiply by the direct labor rate to find the total direct labor cost.

The desired ending inventories for each month are calculated as follows:

• For October: \[ \text{Ending Inventory}_{\text{October}} = 0.2 \times \text{Sales}_{\text{November}} = 0.2 \times 50000 = 10000 \]
• For November: \[ \text{Ending Inventory}_{\text{November}} = 0.2 \times \text{Sales}_{\text{December}} = 0.2 \times 60000 = 12000 \]
• For December: \[ \text{Ending Inventory}_{\text{December}} = 0.2 \times \text{Sales}_{\text{January}} = 0.2 \times 20000 = 4000 \]

The beginning inventories for each month are:

• For October: \[ \text{Beginning Inventory}_{\text{October}} = 8000 \]
• For November: \[ \text{Beginning Inventory}_{\text{November}} = \text{Ending Inventory}_{\text{October}} = 10000 \]
• For December: \[ \text{Beginning Inventory}_{\text{December}} = \text{Ending Inventory}_{\text{November}} = 12000 \]

The production requirements for each month are calculated as follows:

• For October: \[ \text{Production}_{\text{October}} = \text{Sales}_{\text{October}} + \text{Ending Inventory}_{\text{October}} - \text{Beginning Inventory}_{\text{October}} = 40000 + 10000 - 8000 = 42000 \]
• For November: \[ \text{Production}_{\text{November}} = \text{Sales}_{\text{November}} + \text{Ending Inventory}_{\text{November}} - \text{Beginning Inventory}_{\text{November}} = 50000 + 12000 - 10000 = 52000 \]
• For December: \[ \text{Production}_{\text{December}} = \text{Sales}_{\text{December}} + \text{Ending Inventory}_{\text{December}} - \text{Beginning Inventory}_{\text{December}} = 60000 + 4000 - 12000 = 52000 \]

The total direct labor cost is calculated using the formula: \[ \text{Total Direct Labor Cost} = \sum (\text{Production}_{\text{month}} \times \text{Direct Labor Hours per Unit} \times \text{Direct Labor Rate}) \] Substituting the values: \[ \text{Total Direct Labor Cost} = (42000 \times 0.1 \times 20) + (52000 \times 0.1 \times 20) + (52000 \times 0.1 \times 20) = 292000 \]

Final Answer