For Gundy Company, units to be produced are 5,280 in quarter 1 and 6,400 in quarter 2. It takes 2.0 hours to make a finished unit, and the expected hourly wage rate is $15 per hour. Prepare a direct labor budget by quarters for the 6 months ending June 30, 2020.

To create a direct labor budget, we will calculate the number of hours required for production and then multiply that by the wage rate per hour to get the total labor cost for each quarter.

First, we need to calculate the total labor hours needed for each quarter.

For quarter 1: Units to be produced: 5,280 units Hours needed per unit: 2.0 hours/unit Total hours needed = 5,280 units * 2.0 hours/unit = 10,560 hours

For quarter 2: Units to be produced: 6,400 units Hours needed per unit: 2.0 hours/unit Total hours needed = 6,400 units * 2.0 hours/unit = 12,800 hours

Now, let's calculate the total labor cost for each quarter by multiplying the total hours needed by the hourly wage rate.

For quarter 1: Hourly wage rate: $15/hour Total labor cost = 10,560 hours * $15/hour = $158,400

For quarter 2: Hourly wage rate: $15/hour Total labor cost = 12,800 hours * $15/hour = $192,000

Therefore, the direct labor budget for Gundy Company for the 6 months ending June 30, 2020, would be as follows:

Quarter 1: Total Hours: 10,560 Total Labor Cost: $158,400

Quarter 2: Total Hours: 12,800 Total Labor Cost: $192,000

Extra: A direct labor budget is an essential component of the master budget, which is a comprehensive financial planning document that companies use to plan for future business activities. The direct labor budget helps the company plan how much it will spend on labor to meet production goals.

For school students learning about budgets, it is important to understand that direct labor refers to the work of employees that is directly associated with converting materials into finished products. It does not include indirect labor, which is the work of employees who do not directly manufacture the product, such as supervisors and maintenance staff.

In calculating the direct labor budget, we have to consider two factors: the number of units that need to be produced and the amount of labor time required to produce each unit. By knowing the wage rate, we can then estimate the total labor costs. Budgeting helps businesses to plan expenditures, ensure that they have enough funds to operate, and set financial goals and benchmarks for measuring performance over time.