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Idle Time question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Idle Time question

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 5, 2021 at 10:31 am #639990
    AymanR7
    Participant
    • Topics: 12
    • Replies: 13
    • ☆

    Budgeted production in a factory for next period is 4800 units. Each unit requires five labour hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.

    What is the budgeted total labour cost for the next period?

    I did this question and got $288000 as the answer, but I am not sure if it is correct.

    November 5, 2021 at 3:52 pm #640012
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and workings 🙂

    Your answer is not correct.

    If 20% of the total time is idle, then only 80% of the time paid for is used to actually make the units.
    They will be working 4,800 x 5 = 24,000 hours and therefore they will have to pay for 24,000/80% = 30,000 hours. (And it checks – 20% x 30,000 = 6,000 hours idle, leaving 24,000 hours worked).

    Therefore the total labour cost is 30,000 hours x $10 per hour = $300,000.

    November 8, 2021 at 10:19 am #640217
    AymanR7
    Participant
    • Topics: 12
    • Replies: 13
    • ☆

    Thank you for the explanation Sir, I understand my mistake now. This question was from a mock exam that’s why there wasn’t an answer for the question.

    November 8, 2021 at 3:37 pm #640229
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54671
    • ☆☆☆☆☆

    You are welcome.

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    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Idle Time question’ is closed to new replies.

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