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Hi,
I was wondering if I could get some assistance on these 2 questions. I’m finding it difficult to account for the defective items scrapped and the idle time:1. Budgeted sales for December is 18,000. At end of production process 10% of production units are scrapped as defective. Opening inv for December are budgeted to be 15,000units and closing inv with be 11,400 units. All inventories of finished goods need to pass the quality control check.What is the production budget for December?
2. T Co manafactures a single product. Budgeted production output for august is 200 units. Each unit requires 6 labour hrs for completion and anticipates 20% idle time. labour is paid at £7 per hour. what is direct labour cost budget for august?
Thank you in advance! 🙂
1. For every 100 units produced, 10% are scrapped and therefore only 90 of the units are good units.
Putting it the other way round, for every 90 units required, they will need to produce 100 units.So the total produced needed will be 100/90 x the units required.
2. For every 100 hours they pay for, workers will be idle for 20 hours and therefore only 80 hours will actually be worked.
Putting it the other way round, for every 80 hours of work they will have to pay for 100 hours.So the total hours paid for will be 100/80 x the hours of work needed.
Refer to the 2nd question in BPP revision kit answer they mentioned it as below
Allowance for idle time(20% of total time =25% of active time) which is 300 hrs
How did they calculate active time as 25% rather than 80%
They do not say that active time is 25% !! They say that the idle time is 25% of the working/actve time.
Look again at what I typed in my reply.
For every 80 hours of work there will have been 20 hours idle.
20/80 = 25% of the working hours.
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