- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
I have a question on this topic and hope you can help me to understand the logic.
Budgeted production in a factory for the next period is 4,800 units. Each units requires 5 labour hours to make. Labour hour 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.
This question was being explained in the video. Initially I do understand the beginning part but I seem to be lost at the stage when he mentioned using (4,800 x 5hrs)/0.8
I thought that it should be (4,800 x 5hrs) x 20% and add back the 80% = 100%? but the result for total hours become 28,800 and not 30,000.
They need 24,000 hours of work.
If they paid for 28,800 hours then it will not work out because 20% would be idle which is 5760 hours and that only leaves them 23040 hours of work.For every 100 hours they pay, 20 hours will be idle and therefore there will be 80 hours of work.
Putting it the other way round, for 80 hours of work they need to pay for 100 hours.So for 24,000 hours of work they need to pay for 100/80 x 24,000 = 30,000 hours.
(And then 20% x 30,000 = 6,000 hours are idle, leaving 24,000 hours of work)
- You must be logged in to reply to this topic.