Each of Pallet, Inc.'s production workers can produce four wooden pallets per hour. During the month of June, Pallets, Inc. has forecast sales of 100 000 pallets. The beginning inventory was 10 000 pallets, and desired ending inventory is 25 000 pallets. How many hours of direct labour must be budgeted to meet production needs?
A) 25 000
B) 21 250
C) 33 750
D) 28 750

Question

Quizplus · Accepted Answer

To meet the production needs, Pallet, Inc. must first calculate the total number of pallets needed to be produced. This includes the forecast sales plus the desired ending inventory minus the beginning inventory: 100,000 (forecast sales) + 25,000 (desired ending inventory) - 10,000 (beginning inventory) = 115,000 pallets. Since each worker can produce four pallets per hour, the total hours of direct labor required are 115,000 pallets / 4 pallets per hour = 28,750 hours.