Budgets and Expected Variances The Werelius Manufacturing Company uses standard costs and budgets for planning and controlling current production of its two products, F and G. Schedules for the year ending December, 19_1, call for the production of 6,000 units of F and 1,000 units of G.

The standards set for direct labor call for 14 direct-labor hours per unit for F and 20 direct-labor hours for G. However, these standards have been deliberately made tight so as to encourage better performance. Management expects that direct-labor performance will fall short of these goals by one direct-labor hour per unit for each product.

The standard rate for direct labor is $6 per hour. However, negotiations are under way with the union for a new contract. Although the results of these negotiations are uncertain, management expects the rate for direct labor to rise to $6.30 per hour.

Develop the budget for direct labor, showing both standard cost and expected cost, and show any expected or budgeted variances.