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Budgeted production during next month is 8,200 units. Each unit require 6 labour hours to make.

0 Votes
Budgeted production during next month is 8,200 units. Each unit require 6 labour hours to make.

Labour is paid $15 per hour, and idle time represents 10% of the total time paid.

What is the budgeted total labour cost for next month?

May 2nd 2014 AN ACCA USER 340 Points

6 Replies

+3 Votes

Question is quite straight forward
but it took me a minute to understand the scenario

entire question is revolving around one line

10% of the ''total time paid'' is idle time..

Total time to make units + idle time = total time

NOW look

If lets say total time is 100% and idle time is 10%

soo
Total time taken to make units + 10% = 100%
so it means .. total time take to make units = 90%

total taken to make units = 8200 x 6 = 49200 ( which is 90% of the total time)

so total time = 49200/90 x 100 =54666.666667 hours (this time include 10% of the idle time )

When this will be invoiced it will be 54666.66667 x 15 = 820000 Bingo :P ...

May 10th 2014 AN ACCA USER 1,610 Points
+1 Vote

cost per unit= $15*6hrs= $90 per unit

therefore: total labour cost = $90 * 8200units
= $738000
if idle time is 10% of time paid the then = 0.1 * total labour cost
= .01 * $738000
= $73800
budgeted total labour cost = $738000 - $73800
= $664200

May 2nd 2014 AN ACCA USER 170 Points
+1 Vote
im afraid that all the answers found are wrong. the answer i was given is $820,000 which i failed to understand how it was calculated. i actually found $811,800 by calculating 8,200 units x 6hours x $15/hr = $738,000 + 10% ($73,800)idletime = $811,800.
May 5th 2014 AN ACCA USER 340 Points
0 Votes
It seems you are not understanding the idea of markup and margin.
You simply calculated markup.
mark up means you worked 10hour then 1 more hour you need as idle time.
margin means for 10 hour you work for 9 hour  and 1 hour is your idle time.
your calculation of $738,000 is fine.
now you need to know this is the payment for 90% active time and for 10% of idle time the pay will be 73800/9 = 82000
Now add up 738000 and 82000
Gives$ 820000
May 15th 2014 AN ACCA USER 8,730 Points
0 Votes

8200 units x 6 hours/unit = 49200 hours

These are the working hours that are equal to 90% as the remainder 10% is Idle time. So,
49200 x 100/90 = 54666.67 Total hours

Labor is paid $15 per hour so, 54666.67 hours x $15 = $820000.

May 16th 2014 AN ACCA USER 180 Points
0 Votes

6 hrs + 10% X = X

where X is the total time (time to produce 1 unit + idle time)

X = 6/0,9 = 6,66666667 (time per unit)

6,6666667 x 15 $ x 8200 units =$ 820,000

June 12th 2014 AN ACCA USER 950 Points
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