- This topic has 4 replies, 2 voices, and was last updated 8 years ago by
.
- Posts
Hello John,
I’ve been seriously struggling on exactly the same question as previously posted by a student, and I was just about to post it, so I’m happy that somebody else has already done it. It is:
Budgeted production in a factory is 4800 units. Each unit needs 5 labour hrs. Labour is $10 per hr. Idle time is 20% of total labour time.
What is total budgeted labour cost for the next period?
What has confused me was 5/80%
So, I understand that idle time represents 20% of total labour time. Thus 80% represents total productive time.
I was perhaps incorrectly going to write something like the following:
4800 units x 5hrs = 24,000 hrs
Less:
Idle Time 0.2 x 24,0000= (4800 hrs)
Productive time = 19,200 hoursAs the question asked for budgeted total labour cost, I assumed that meant Direct labour time (productive hours) + Indirect labour time (idle time)
Therefore, I wrote:
4800 hours x $10 = 48,000
19,200 x $10 = 192,000Budgeted total labour cost = $240,000
I’m very confused as I know I haven’t done this correctly but I don’t understand the:
5/80%
Please could you help me as I’m really stuck. Thank you.
The time needed for actual production is 4,800 x 5 hours = 24,000.
But this is the actual working time needed, so they will need to actually pay for more hours because some of the hours they pay for will not be working (be idle).
For every 100 hours they pay, they will only actually be working for 80 hours.
Or – putting it the other way round – for every 80 hours of work they will need to pay for 100 hours.So for 24,000 hours of work, they will need to pay for 100/80 x 24,000 hours = 30,000 hours.
(They pay for 30,000 hours, 20% of them will be idle which is 6,000 hours, leaving 24,000 hours actually working which is what is needed 🙂 )
Thanks John,
It’s taken me a while to get my head around this one.
The first time I read what you wrote about, I thought it would be 80/100 x 24,000 hours. But it’s notI’m starting to understand. They pay their workforce for 30,000 hours, of which, only 24,000 are productive hours.
(100/80) x 5 = 6.25
6.25 x 4800 = 30,000
30,000 x $10 = $300,000John,
Does the above sort of mean that to obtain 5 hours of productive work , the factory employer must pay the workforce for 6.25 (or 6hrs 25 mins) of work ?
Thanks
- You must be logged in to reply to this topic.