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John Moffat.
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bazif17
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T Co manufactures a single product, M. Budgeted production output of product M during August is 200 units. Each unit of product M requires 6 labour hours of completion and PR Co anticipates 20 per cent idle time. Labour is paid at a rate of $7 per hour. What is the direct labour cost budget for August?
Answer:
Active hours required for production = 200 x 6hrs = 1200
Allowance for idle time(20% of total time = 25% of active time) = 300
Total hrs to be for = 1500 x $7phDirect labour cost budget = $10500.
Please can you explain how the allowance for idle time was calculated?
John Moffat
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For every 10 hours paid for, 2 hours will be idle, leaving only 8 hours for production.
Putting it the other way round, for every 8 hours of production there must have been 2 hours idle (i.e. 2/8 or 25%).
bazif17
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