The direct labor budget determines the expected labor costs needed for production. The Unknown Comic broke down the activities needed to create a product and then determined how much time is required to produce one unit. It also calculated its expected direct labor cost per hour. This information is provided below:
Direct labor hours per unit | 0.40 |
Direct labor cost per hour | $17.00 |
The budgeted labor cost per quarter is then calculated as follows:
total units to be produced
x direct labor hours per unit
= total number of hours needed for production
x direct labor cost per hour
= budgeted direct labor costs
The bottom line for this budget is the estimate of the cost of direct labor that will be needed each quarter. The budgeted total direct labor costs for the year, $43,520, will be needed for the budgeted schedule of cost of goods manufactured.