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Dear Mr Moffat, i have watched your lectures, undestand idle time, still am not being able to get
the answer.Ques: A job requires 2400 actual labour hours for completion but it is anticipated that idle time will be 20% of the total time required. If the wage rate is $10 per hour, what is the budgeted labour cost for the job, including the cost of idle time?
>If employees are paid for their idle hours at the basic rate, labour cost for the job should be 2400 hrs* $10= $24000
>and with 20% of idle time, this makes 1920 actual labour hrs* $10= $19200, which is also not the answer
Please help me out.
For every 100 hours that they pay for, 20 hours will be idle and only 80 hours will be worked.
Putting it the other way round, for every 80 hours of work they will need to pay for 100 hours.
Therefore for 2,400 hours of work they will need to pay for 100/80 x 2,400 = 3,000 hours.
(The idle time is 20% x 3,000 = 600, leaving 2,400 hours for working)
For every 100 hours that they pay for, 20 hours will be idle and only 80 hours will be worked.
Putting it the other way round, for every 80 hours of work they will need to pay for 100 hours.
Therefore for 2,400 hours of work they will need to pay for 100/80 x 2,400 = 3,000 hours.
(The idle time is 20% x 3,000 = 600, leaving 2,400 hours for working)
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