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Budgeted production in a factory for next period is 4,800 units. Each unit requires five
labour hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total
labour time.
What is the budgeted total labour cost for the next period?
Sir,please explain to me thorough
I can’t solveFor every 100 hours that are paid for, 20 hours are idle and therefore only 80 hours are actually worked.
Or, putting it the other way round, for every 80 hours of work they need to pay for 100 hours.
Here, they need 4,800 x 5 = 24,000 hours of work.
Therefore (because of the idle time) they will actually need to pay for 100/80 x 24,000 = 30,000 hours at $10 per hour.
(And, of course, it checks. If they pay for 30,000 hours, then 20% or 6,000 hours will be idle, leaving 24,000 hours for work.)
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