Production Budgets

A-Vic
A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
i though i had these fairley much in the bag but ever now and again machine hours and labour hours are stumping me.

Currently working through december 2007 Mac Paper and really stuck with 1.1 c and d.

any help or explanation would be great


Thanks


Vic

Comments

  • jilt
    jilt Registered Posts: 2,903 Beyond epic contributor 🧙‍♂️
    A-Vic wrote: »
    i though i had these fairley much in the bag but ever now and again machine hours and labour hours are stumping me.

    Currently working through december 2007 Mac Paper and really stuck with 1.1 c and d.

    any help or explanation would be great


    Thanks


    Vic

    I actually got this right but worked it out in a slightly different way. I'll open messenger just gonna get a cuppa
  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘
    A-Vic wrote: »
    i though i had these fairley much in the bag but ever now and again machine hours and labour hours are stumping me.

    Currently working through december 2007 Mac Paper and really stuck with 1.1 c and d.

    any help or explanation would be great


    Thanks


    Vic

    From Dec 2007 Paper

    Production
    • Division Q owns 5 machines, all of which are depreciated at a cost of £200,000 per month.
    • Each machine can operate for a maximum of two 7.5 hour shifts a day for 20 days a month.
    • Each machine can produce 120,000 games per month when operating at full capacity.
    • Each game requires the same time in production.
    • Other fixed production overheads are £40,000 per month per machine.
    • Fixed production overheads are absorbed on the basis of budgeted machine hours.
    Labour
    • Each machine requires 5 operators who each cost £20 per hour. Operators work a flexible hours
    system which means they are paid only for the number of hours required in production, which is the
    same as the machine hours.
    • Each month has 20 working days.

    TASK 1.1 C number of games produced

    (a) per machine hours

    Each MACHINE is working at 15 hours (2 shifts @ 7.5 hrs) per day
    there are 20 days in a month
    therefore monthly machine hours = 15 x 20 = 300 hours per machine

    Each Machine produces 120,000 games per month (3rd bullet point)

    therefore for every machine hour (120,000 / 300=) 400 games can be produced.

    (b) Each machine requires 5 operators
    machine runs for 15 hrs therefore labour hrs = 15 x 5 = 75 hrs per day
    there are 20 days in a month
    therefore monthly labour hours = 20 x 75 = 1500 hours

    Each Machine produces 120,000 games per month (3rd bullet point)

    therefore (120,000 / 1500=) 80 games produced per Labour Hour


    TASK 1.1 D Fixed production overheads

    Depreciation costs ( 5 machines x £200,000 each ) = £1,000,000
    Other production overheads (5 machinesx £40,000) = £ 200,000

    Total Fixed production overheads = £1,200,000

    The answers has the same information presented differently
  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
    Thanks SDV its the wording i have to get my head around, and what info to pick out :)
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