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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › How do we get this answer?
A job requires 2,400 actual labour hours for completion and it is anticipated that there will be 25% idle time.If the wage rate is $5 per hour, what is the budgeted labour cost for the job?
Ans: 16000
A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the labour cost per hour is $8.00. The total labour cost budgeted for the job is?
Ans: 35200
First question:
If there is 25% idle time, it means that for every 100 hours paid, 25 hours are idle, and therefore only 75 hours are worked.
Putting it the other way round, for every 75 hours of work we need to pay for 100 hours.
Therefore, for 2,400 hours of work we need to pay for 100/75 x 2,400 = 3,200 hours.
(and obviously it ‘checks’ – if they pay for 3,200 hours, then 800 hours will be idle leaving 2,400 hours for work)
3,200 hours at $5 per hour is $16,000.
It is the same approach for the second question.
Thanks so much sir~
You are welcome 🙂