 hello in this lecture we're going to continue on our master budget and we will be working on the direct labor budget at this time so remember what we have done so far we have to start off in this way we did the sales budget in order to know what we're going to sell we have to sell we have to do that first and then we did the production budget in terms in terms of how much units we're going to need to produce based on the sales budget then we did the raw materials budget we need to do these two budgets the production budget before we do the raw materials budget and now we're going to work on the direct labor budget notice of course we don't really need to do the raw materials before the labor budget but we do however need to do the sales budget and the production budget in order to determine how much labor it's going to we will need in order to fulfill our obligations in the budgeting process the direct labor is a little bit easier a little bit more straightforward to my mind so this is how we're going to take a look at that we're going to start off with a similar area that we started off the materials budget which would be that we need to have know how many units we're going to produce then we can see how many hours it's going to take to produce them and then we can estimate how much it's going to cost per hour in order to produce these so where are we going to get the production in units well that's going to equal in july the number that we determine in the production budget so remember the production budget tells us how many units we actually need to produce and it's not equivalent to the units that we will we think that we're going to sell because we had to go through this process to determine how many units we need to produce and we came up with this 19586 for july and that's where we're going to start for the direct labor budget for july and we're going to do that same process i could copy it across but i'm going to just point to it for august so that we could see exactly where it's coming from a few different times so it's going to be coming from the production budget for august in this case i'm going to hit tab so there's that number the 20 000 and then in september the production uh the direct labor budget we're taking this number from the production budget being the 20 500 units that we will be producing then of course what are we going to need to know in order to determine our budget for labor we're going to need how many hours does it take to create one unit and note that there are some conversion problems sometimes we pay people generally hourly if a problem gives you minutes then you're going to have to convert two hours most likely and note that that conversions can be a little bit trickier than you would think because you know there's 60 minutes in an hour and whatnot so just if you if your problem happens to have minutes in it and doesn't give you hours but gives you an hourly rate just make sure that you're going to have to perform that conversion here we're saying that the labor hours required to finish a unit are 0.5 or half an hour so it's going to take 0.5 hours to make a unit and therefore we're just going to say 0.5 here and 0.5 and 0.5 that's how much time it's going to take in order to create make the units therefore we're going to take the 19, 586 times the 0.5 and enter so that means that it's going to take 9,793 now again you might want to ask well where are they going to come up with a 0.5 obviously a problem like this would have to give you the 0.5 in real life we would come up with with some type of estimates on how long it would take to create one individual unit and there's going to be different theories on terms of how we'll come up with that number at a later time but a problem like this will generally give you that number so we'll multiply that out for August this is how many units we need to produce times it's going to take 0.5 hours per unit and tab and then for September we're going to take 20,500 units times 0.5 per unit so we now have the number of hours it's going to take for July, August and September and then we're going to multiply that times the labor rate once again the problem is going to have to give you a labor rate here we're going to say it's $14 according to the problem 14 and once in real life of course we'd have to come up with the labor rate in some way as well and it might have to be some type of estimate so we're going to say it's going to cost us on this estimation $14 per hour so 14 and 14 once again remember that when we think about a problem like this we usually are going to be given the rate in hours so if again if it's a problem that's given you how many minutes it takes to do a certain task you're going to have to do some type of conversion most likely and that will give us our labor in dollars so that means that if we if it's going to take 9793 hours then we're going to multiply that times $14 per hour to give us