 The direct labor budget is based on data from the production budget. We need to know how many units are going to be produced before we know how much direct labor will be needed. You can see that the direct labor budget is the fourth budget completed in the master budget process. The common format to determine the amount of direct labor needed is to multiply the units to be produced by the direct labor hours per unit. That results in direct labor hours needed for production. We can multiply that amount by the average cost per direct labor hour to arrive at the total cost of direct labor. So let's look at how to do this in Excel. Notice the column letters and row numbers. We'll reference these as we look to build these budgets in Excel. Here we have both the production budget and the direct labor budget. We start by linking the two budgets together by having the units to be produced in the direct labor budget linked to the same cells in the production budget. Direct labor hours needed for production and the total cost of direct labor can both be formulas, as I've shown here. Finally, some of the numbers have just been assumed because I want to keep the examples straightforward.