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Sir, can you explain this small part of this question? I am confused about how they got this particular value.
A company manufactures a single product, M. Budgeted production output of product M during August is 200 units. Each unit of product M requires 6 labour hours for completion and PR Co anticipates 20 per cent idle time. Labour is paid at a rate of $7 per hour. What is the direct labour cost budget for August?
The answer to this question state that the allowance for idle time (20% of total time = 25% of active time). How do they calculate 25% of the active time?
Thank you so much
For every 10 hours that is paid, 2 hours (20%) will be idle and therefore 8 hours will be working (i.e. active).
Therefore for every 8 active hours there will be 2 hours idle. i.e. 2/8 or 25% of the active hours will be idle.