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Sir in standard costing we say that we allow idle time for standard costing and I had this question which I just thought of by myself
If a company uses 300 labours hours and there was idle time of 20 hours
What is the standard time of labour usage for the company
Would the answer be 300 hours sir since we allow idle time for standard costing???
The standard time is the budgeted working time per unit. The working time is the time paid for less the idle time. If they use 300 labour hours, then they must be working for 300 hours but they will need to pay for 320 hours.
ok so when we pay for labour we include idle time but when we try ti figure out usage we remive idle time right?
Im still not sure why we added the 20 because when we try to find efficiency ratios we include idle time but remove for variaces
Sir I just found out that there is something called normal idle time and abnormal idle time
Apparently for normal idle time we include the cost but for abnormal idle time it is not?
Is this true and if so does that apply in a similar fashion for labour hours
Normal idle time is the expected idle time and this is built into the standard costings. Abnormal idle time is any extra idle time that actually happens. This isn’t built into the costings but creates a variance, but idle time variances are not examinable until Paper PM.
Oh ok so basically for MA all that is needed to know about idle time is that it is included when we caluculate labour hours right sir???
Ok so for this question we don’t consider standard time because it is budgeted and not standard right?
Budgeted production in a factory for next period is 4,800 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?Why are you attempting questions for which you do not have an answer?
Standard time is the budgeted time.
The standard hours worked per unit is 5 hours.
Therefore they need to pay for 10/8 x 5 = 6.25 hours for each unit (20% x 6.25 = 1.25 hours are idle, leaving 5 hours for work).
Therefore for 4,800 units they need to pay 4,800 x 6.25 x $10
The answer for this question was in the kaplan revision kit book and yes $300,000 was the same answer for which you calculated
Sir could you explain where you got the figures of 10 and 8 when you found 6.25 hours for each unit
For every 10 hours they pay for, 2 hours (20%) are idle, and therefore 8 hours are worked.
Putting it the other way round, for every 8 hours they work, we have to pay for 10 hours.
So if they work for 5 hours, they have to pay for 10/8 x 5 = 6.25 hours.
(And I wrote in my previous reply the check that this is correct)
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