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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.
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.
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.
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