**Case Study: Blue Spruce Welding's Budgeted Cost Analysis for 2022****Introduction:**Blue Spruce Welding specializes in rebuilding spot welders for manufacturers. This case study presents the budgeted cost data for the year 2022.**Table: Budgeted Cost Data**| Cost Description | Time Charges | Material Loading Charges ||-------------------------------------|--------------|--------------------------|| Technicians' wages and benefits | $202,800 | - || Parts manager's salary and benefits | - | $39,300 || Office employee's salary and benefits | $39,000 | $14,780 || Other overhead | $7,800 | $29,120 || **Total budgeted costs** | **$249,600** | **$83,200** |**Business Objectives:**- The company aims for a $39 profit margin per hour of labor.- A target profit margin of 28% on parts is also set.- Blue Spruce has allocated 7,800 hours for repair time in the upcoming year.- The estimated total invoice cost for parts and materials in 2022 is $416,000.**Task (a): Calculating the Labor Rate**- **Instruction:** Compute the rate charged per hour of labor. - **Formula Input Required:** Determination of labor rate per hour.This overview presents the required data and objectives to aid in calculating the appropriate labor rate to meet Blue Spruce Welding's financial and operational goals for 2022.

Answered: Blue Spruce Welding rebuilds spot…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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**Case Study: Blue Spruce Welding's Budgeted Cost Analysis for 2022**

**Introduction:**
Blue Spruce Welding specializes in rebuilding spot welders for manufacturers. This case study presents the budgeted cost data for the year 2022.

**Table: Budgeted Cost Data**

| Cost Description | Time Charges | Material Loading Charges |
|-------------------------------------|--------------|--------------------------|
| Technicians' wages and benefits | $202,800 | - |
| Parts manager's salary and benefits | - | $39,300 |
| Office employee's salary and benefits | $39,000 | $14,780 |
| Other overhead | $7,800 | $29,120 |
| **Total budgeted costs** | **$249,600** | **$83,200** |

**Business Objectives:**
- The company aims for a $39 profit margin per hour of labor.
- A target profit margin of 28% on parts is also set.
- Blue Spruce has allocated 7,800 hours for repair time in the upcoming year.
- The estimated total invoice cost for parts and materials in 2022 is $416,000.

**Task (a): Calculating the Labor Rate**
- **Instruction:** Compute the rate charged per hour of labor.
- **Formula Input Required:** Determination of labor rate per hour.

This overview presents the required data and objectives to aid in calculating the appropriate labor rate to meet Blue Spruce Welding's financial and operational goals for 2022.

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INTRODUCTION:

Labour rates are used to calculate both the price of employee time invoiced to customers and the cost of that employee's time to the business. When a labour rate is used to define the cost of labour, it can be further refined into the incremental cost of labour or the fully-loaded cost of labour. Consider the following distinctions and applications:

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