Kaplan Revision Kit: Accounting for Labour

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July 22, 2016 at 7:56 pm #328433
saiqariaz
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Hi Sir,
This question came up in the Kaplan Revision Kit and I can’t figure out to solve it.
Question: 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?
July 23, 2016 at 10:24 am #328479
John Moffat
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Since the time worked it 80% of the time paid for (because of the idle time), each unit produced means paying for 5 / 80% = 6.25 hours at $10 per hour.
You should now be able to calculate the total cost 🙂
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