Labour in production budgets
AVic
Registered Posts: 6,970 Beyond epic contributor 🧙♂️
Currently doing MAC 06 task 1.2 for some reason am struggling with the above for recalculation as follows:
4Fones Ltd employs 16 people in production who each work a standard 7hour day and
5day week.
• Each month has exactly 20 working days.
• Each 4G phone takes 0.5 labour hours to produce.
• The basic labour rate is £10 per hour and overtime is paid at one and a half times the
normal hourly rate.
• Budgeted overtime premium is included as part of the direct labour cost.
• 4Fones Ltd’s 16 employees are each prepared to work an additional 15 hours per week
for the 4week period. These additional hours will be paid at a premium of 50%.
They predict sales of 25,000 units if the price were set at
£50 per phone, instead of the current £110. A local recruitment company can provide
temporary workers to cope with the additional demand. The hourly cost for these temporary
workers will be £20 per hour.
Any help would be great
4Fones Ltd employs 16 people in production who each work a standard 7hour day and
5day week.
• Each month has exactly 20 working days.
• Each 4G phone takes 0.5 labour hours to produce.
• The basic labour rate is £10 per hour and overtime is paid at one and a half times the
normal hourly rate.
• Budgeted overtime premium is included as part of the direct labour cost.
• 4Fones Ltd’s 16 employees are each prepared to work an additional 15 hours per week
for the 4week period. These additional hours will be paid at a premium of 50%.
They predict sales of 25,000 units if the price were set at
£50 per phone, instead of the current £110. A local recruitment company can provide
temporary workers to cope with the additional demand. The hourly cost for these temporary
workers will be £20 per hour.
Any help would be great
0
Comments

Easiest way is just to recalculate it completely:
First calculate how many you need to produce.
Then calculate the hours you need.
Calculate how many hours are normal hours.
As overtime is cheaper then temp workers, so calculate the overtime.
Calculate the rest of hours that is needed, so you know how many temp hours you need.
Calculate the total costs with the hourly rates to the hours you just calculate
Expected sales is 25,000 units
Opening stock is 1,350 units
Closing stock is 8,000 units
The production is then 25,000  1,350 + 8,000 = 31,650
They take half an hour to produce, so you need 15,825 hours to produce all phones.
The normal staff works 7 hours per day for 20 hours. They got 16 people so your normal hours are 2,240 (7 x 20 x 16).
They do 15 hours overtime per week at most, so that's 16 x 15 x 4 = 960 hours.
So you need temporary workers to make up for 12,625 hours (15,825  2,240  960).
Costs of these hours is listed separately.
Normal hours: 2,240 x 10 = 22,400
Overtime: 960 x 15 = 14,400
Temp workers: 12,625 x 20 = 252,500
Add it all together and you come to 289,300.
(I didn't check the answers, but I think that it is about right)
Hope this helps!
Rinske0 
thanks just worked out where i was going wrong i was doing it for just one week (16 x 15) but forgot the 4weeks doh cheers0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 12.5K For AAT students
 318 NEW! Qualifications 2022
 156 General Qualifications 2022 discussion
 11 AAT Level 2 Certificate in Accounting
 56 AAT Level 3 Diploma in Accounting
 92 AAT Level 4 Diploma in Professional Accounting
 8.8K For accounting professionals
 23 coronavirus (Covid19)
 272 VAT
 92 Software
 274 Tax
 136 Bookkeeping
 7.2K General accounting discussion
 201 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 345 Feedback for AAT
 2.8K Chat and offtopic discussion
 582 Job postings
 16 Who can benefit from AAT?
 36 Where can AAT take me?
 42 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 66 AAT membership