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Please help me understand how 20% Idle time becomes 25% in calculation.
11.26. 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?– My calculation: 4800*5*1.2 = 28800
I did multiply by 1.2 as “1 + 0.2 (Idle time)” however it’s incorrect.
I don’t understand the part where it explains in the answer “24000 hours is only 80% of the total hours required to produce 4800 units. Total hours = 24000*(100/80) = 30000 hours.”Can you please help me understand how 20% Idle time becomes 100/80 (0.25) with an example? I really need to get this right as it doesn’t seem to be a difficult question but somehow I’m having a hard time getting this… Thank you so much!
If 20% of the hours they are paying for are idle hours (i.e. when not working) it means that only the other 80% of the hours are actually being spent working.
So for every 80 hours that they are working they are being paid for 100 hours.
So the total hours being paid for (at $10 per hour) are 100/80 time the hours that they are actually working.
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