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Direct labour cost budget BPP question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Direct labour cost budget BPP question

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • October 15, 2022 at 12:39 pm #668692
    bazif17
    Participant
    • Topics: 15
    • Replies: 1
    • ☆

    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 $7ph

    Direct labour cost budget = $10500.

    Please can you explain how the allowance for idle time was calculated?

    October 15, 2022 at 5:11 pm #668721
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    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%).

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