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Budgeted production of product M during August is 200 units
each unit of M requires 6 labour hrs and co. anticipates 20% idle time.
Labour paid $7/hr200 units x 6 = 1200
20% idle time means = 1200/80*100=1500 labour hrsquestion ask what is the direct labour cost budget for august.
answer shows 1500 x 7= $10500but my question is why should i add the cost of 300 idle labour hours time into the direct cost budget.
Idle time is the indirect cost.so isn’t the answer should be 1200 x 7 =8400But if they expect there will be idle time then they will build it into their costings. It is only unexpected idle time that will be treated as an indirect cost.
so that means when we prepare budget we don’t account for idle time separately and include it into the standard labour time.
We only record idle on actual basis when it incurrs. Am i right?and in any question related to budget will we put idle time into direct labour cost budget unless its specified
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