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Topic
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Becker Question –
Jordan Auto has developed the following production plan.
Month Units
January 10,000
February 8,000
March 9,000
April 12,000
Each unit contains three pounds of raw material. The desired raw material ending inventory each month is 120 percent of the next month’s production, plus 500 pounds. (The beginning inventory meets this requirement.) Jordan has developed the following direct labor standards for production of these units.
Department 1 Department 2
Hours per unit 2.0 0.5
Hourly rate $6.75 $12.00
Jordan Auto’s total budgeted direct labor dollars for February usage should be:
a. $156,000
b. $210,600
c. $175,500
d. $165,750
Explanation
Choice “a” is correct. $156,000 budgeted direct labor dollars for February, calculated as follows:
8,000 units × 2.0 hrs × $6.75 = $ 108,000
8,000 units × 0.5 hrs × $12.00 = 48,000
Total budgeted direct labor dollars for February $ 156,000
My Question:
Why are there two departments? How are we supposed to know the number of tables produced in each department?
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