Direct Labor Budget

John, the finance manager at SpeedX Cycles, is preparing the direct labor budget for the next quarter.

The direct labor budget shows the total labor hours and labor cost required to meet production goals.

To prepare this budget, John needs three main components , the number of units to be produced, the direct labor hours required per unit, and the direct labor cost per hour.

SpeedX plans to produce five thousand bicycles next quarter.

Each bicycle requires three hours of direct labor, and the labor rate is fifteen dollars per hour.

First, John calculates the total direct labor hours required. Producing five thousand bicycles at three hours each requires fifteen thousand labor hours.

Next, John calculates the total direct labor cost. Multiplying fifteen thousand labor hours by fifteen dollars per hour results in two hundred twenty-five thousand dollars of direct labor cost.

This direct labor budget helps John plan staffing needs and control production labor costs for the quarter.