Basic. PJ has budgeted sales for the next two years of 144000 units per annum spread evenly
Question:
Basic. PJ has budgeted sales for the next two years of 144000 units per annum spread evenly throughout each year. The estimated closing inventory at the end of this year is 6500 units.
PJ wants to change its inventory policy so that it holds inventory equivalent to one month’s sales. The change in inventory policy will take place at the beginning of next year and will apply for the next two years.
Each unit produced requires two hours of direct labour.
The budgeted direct labour rate per hour is $15. It is anticipated that 80 per cent of production will be paid at the budgeted rate and the remainder will be paid at the overtime rate of time and a half. PJ treats overtime costs as part of direct labour costs.
Required:
Calculate the direct labour cost budget for the next year.
(3 marks)
CIMA P1 Performance Operations
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