Budgeting exam-help please

angi13
angi13 Settling In NicelyRegistered Posts: 24
Hi,
I am studying for Budgeting exam and I am stuck on how to calculate labour. Help please

Task 1.4B April2010
Calculate these sales and cost budgets for April
Budget for the year Budget for April
Units sold..........................24,000...........................2,000
Units produced ..................25,000...........................2,500
Sales...................... .........480,000.........................?????
Material used..................... 80,000..........................?????
Labour...............................64,800..........................?????
Variable production overhead..30,000.........................?????
Fixed overheads...................1,800...........................?????

Each unit is made from 2 kg of material costing £1.60 per kg
It takes 12 minutes to make each item.

Comments

  • Rinske
    Rinske Font Of All Knowledge Registered Posts: 2,453
    You worked out how to calculate the units produced. How much time do you need to create these units?

    You got a note on the bottom saying it takes 12 minutes to make each item, that means you can make five items per hour. (60 divided by 12 is 5 if you need to calculate it).

    If you need to create 2,500 units and you create 5 per hour, then how many hours do you need?

    If you don't know how to calculate the answer, replace the 2,500 by 10, and then tell me if you know. So if you need to create 10 items, and you create 5 items per hour, how many hours do you need? (10 divided by 5 is 2) If you apply the same logic to the 2,500, you should find the number of hours required.

    If your budget asks for hours, this means you are done at this point.

    If your budget asks for the amounts, you just need to know the cost per hour and calculte the required hours times the hourly cost.

    Does this help?

    There are some blogs that Sandy Hood wrote on the site, with a lot of information and explanations on costing and I think he did some on budgetting as well. They can be a great help.

    If you have a look on this page and look at post number 28 from Sandy (should be at the top), you will find a post from Sandy, suggesting all the links to his blogs. Sandy is way better at explaining these things then I am, so have a look and see if it helps you!
  • angi13
    angi13 Settling In Nicely Registered Posts: 24
    Hi Rinske,
    Thank you very much for you advise.

    Because it was requested the amount labour i have calculated as follow:

    We had 350 hours basic time in the month and any extra hours must be worked in overtime. the basic rate is £12 per hour. Overtime is paid at time and half.

    2500/12*60=500hours
    350*£12=£4,200
    150*£18=£2,700

    Labour-£6,900
  • Rinske
    Rinske Font Of All Knowledge Registered Posts: 2,453
    That sounds right to me.

    It might be that your book expects you to write it down as:
    500 times 12 = 6,000 (normal hourly cost) and
    150 times 6 = 900 (premium)

    Arranging the normal hourly rate as basic costs and the premium separated.
    This will depend on your book/ tutor/ any suggestions in the question as to how they expect and I don't know what is right.
    It has the same result (6,900) and it just is a different way of calculating it.

    This is not to confuse you, but just to make you aware of it, as I don't know which way is used or accepted with the new standards.
    If you don't have to know this or if this is confusing you, please just ignore it!
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    Is this from the specimen exam?

    It certainly looks similar.
    Labour
    Basic time @ £12 per hour
    Overtime
    Total
    It takes 4 minutes to make each item
    8 staff work 200 basic hours each
    Overtime is paid time and a half (50% above basic rate)


    And production require 30,000 units

    I've added further comments on the attachment
    Sandy
    [email protected]
    www.sandyhood.com
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    In task 1.4b the technique is the same

    - and the final answer is the figure you put into the table
    Sandy
    [email protected]
    www.sandyhood.com
  • angi13
    angi13 Settling In Nicely Registered Posts: 24
    Hi Sandy,

    Thank you for your advise and attached files.

    I understand now that basic rate is included when we calculate 500*£12=£6,000 and that’s way we only need to time 150 by £6 (12/2)=£900.

    Once again thank you for your help.
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