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Davidson Corporation’s master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company’s expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor, the budgeted direct labor rate is $ __________per hour.

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Answer: 12%

Explanation:

Given the following ;

Expected direct labor cost=$90000

Expected production = 15000 units.

Production time per unit of direct labor 0.5 hours

Therefore, total direct labor required to produce 15,000 units

Total direct labor hour = 15,000 × 0.5 = 7500 labor hours.

Therefore, Budgeted direct labor rate % is given by;

Expected direct labor cost ÷ Total direct labor(hour)

$90,000 ÷ 7500 = 12%