Deep Valley Foods manufactures a product that is first smoked and then packed for shipment to customers. During a normal month the product's direct labor cost per pound is budgeted using the following information.
__________________________________________ Direct _________ Budgeted Direct
_______________________________________ Labor Hours _________ Labor Cost
________________________________________(Per pound) _________ (Per hour)
Process:
Smoking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.08 ............. $20
Packing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.06 ............ 12
The budget for March calls for the production of 500,000 pounds of product. However, March's direct labor costs for smoking are expected to be 5 percent above normal due to anticipated scheduling inefficiencies. Yet direct labor costs in the packing room are expected to be 4 percent below normal because of changes in equipment layout.
Prepare a budget for direct labor costs in March using three column headings: Total, Smoking, and Packing.