Zinn Corporation recently agreed to a union contract provision that guarantees a minimum wage of $1,625 per month to each direct labour employee equivalent to 125 hours of work each month. Currently, 125 employees are covered by this provision. All direct labour employees are paid $13 per hour. Thus, until an employee works 125 hours, the remuneration is a xed $1,625 per employee each month. Rusty Zinn, the assistant to the accountant was given the task of budgeting for the direct labour cost. Because of the contract provision, Rusty decided that the $203,125 (=125 x $1,625 per month) should be treated as a fixed monthly cost. Rusty was instructed to calculate each month's budget using the following formula: $203,125 + $9 per direct labour-hour. Figures for the rst three months of the fiscal year are as follows: April May June Direct labourhours planned and worked 25,000 37,000 57,000 Direct labour costs budgeted $ 428,125 $ 536,125 $ 716,125 Direct labour costs incurred $ 325,000 $ 481,000 $ 741,000 Variance $ 103,125 F $ 55,125 F $ 24,875 U These figures are a source of concern because they show unfavourable variances when production is high, and favourable variances during slow months. The factory manager is certain that this trend does not reflect reality. Required: 1. This part ofthe question is not part ofyour Connect assignment. 2. Develop a formula for direct labour costs more appropriate to the actual cost behaviour, then recalculate the variances for April, May, and June. April May June