COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Expected total labour hours
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Budgeted total indirect labour costs
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Estimated total indirect labour costs
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Budgeted total indirect labour costs
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Detailed explanation-1: -The correct answer is B. The budgeted total direct labor cost is calculated by multiplying the direct labor cost rate and budgeted direct labor hours.
Detailed explanation-2: -It is calculated as: (Expected direct labour hours of actual output ÷ budgeted direct labour hours) × 100%. A ratio of > 100% will indicate above budget production volume and vice versa.
Detailed explanation-3: -Formula: Indirect Labor Cost = (Total Direct Labor Costs * Indirect Labour Rate) / Number of Hours Spent on Indirect Activities.
Detailed explanation-4: -Total labor cost is the aggregate cost of the hours worked by all employees, plus all related payroll taxes and benefits. This amount is used in the budgeting of financial results for a business.