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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?
I know that we have to multiply 4,800units x 5hours x $10 but I have difficulty finding the idle time.
For every 100 hours that are paid for, 20 hours will be idle and so only 80 hours will be worked.
Putting it the other way round, for every 80 hours worked they will need to pay for 100 hours and there will have been 20 hours idle.
Here they need to work for 4,800 x 5 = 24,000 hours. Therefore they will need to pay for 100/80 x 24,000 = 30,000 hours. (And it checks in that of the 30,000 hours paid, 20% so 6,000 hours will be idle which leaved 24,000 hours worked)