Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $21 per hour. The total cost of direct labor for the month of August is: Select one: a. $82,950. b. $4,050. c. $85,050. d. $3,950. e. $168,000.

Answer

The total cost of labor for the month of August is $85,050

Explanation:

Costing a product involves adding direct materials cost, direct labor cost, direct expense and overheads.

Workers that are engaged primarily to carry out production are called direct workers while others are called indirect workers. To produce bread, the baker is a direct worker while the factory security guard is an indirect worker.

To determine cost of direct labor to be charged to a product use the formula below:

Direct labor cost = standard hours * production unit * rate of pay per hour

The standard hour is amount of time a worker is expected to get a unit produced, it is 0.50 hours in our question.

Total direct labour cost = 8,100 * 0.50 * $21 = $85,050

Materials that form part of the product content which are directly used in the production process are known as direct materials while others are called indirect materials. To produce bread, flour becomes a direct material while detergents used in cleaning factory floor becomes an indirect materials.

The summation of direct material cost, direct labour cost and direct expense cost gives prime cost. All other costs - indirect materials cost, indirect labour cost and indirect expense - sum up to give overheads.