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Hello!
Could you please help me with this question from the mock exam:
Budgeted production – 8,200 units. 6 labour hours per unit @ $15 p/h.
Idle time – 10% of total time paid.
What is the total budgeted labour costs for next month?
Answer is $820,000 but I don’t know how to get to that…
Big thanks in advance!The amount of working time needed is 8,200 x 6 = 49,200 hours.
However there is idle time, so for every 100 hours paid they only actually work 90 hours.
Or…to put it the other way round, for every 90 working hours they need to pay for 100 hours.So, for 49200 working hours they need to pay for 100/90 x 49,200 = 54,666.67 hours.
At $15 per hour, this comes to $820,000.
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