# Budgeting - 2010, Sample assessment 1

Registered Posts: 28
Hi,

Was hoping to grab someone's help with a question I'm stuck with.

Task 2.1 - paper 1

"The company has budgeted to make and sell 100,000 units in the coming year.
Each unit takes 0.5 labour hours to make and requires 2kg of raw material. The quality control department can test 8,000 units each month. A contract has been placed to purchase 150,000kg of raw materials at an agreed price. Further supplies can be obtained on the open market but the price is likely to be much higher. The company employs 25 production workers. Each worker works 1,750 in a year in normal time."

How many units of Labour is available to make?
How many overtime hours will be needed?
How much raw material is made in units and kg?

Much appreciated.
Harinder

• Registered Posts: 94 Regular contributor ⭐ ? ⭐
Hi there,

So the company is expecting 100,000 units to make and sell.

Firstly to work out how many labour hours it takes to make 100,000 units, so it will be 0.5 labour hours X (Multiply by) 100,000 units = 50,000 hours to make the units. You are then told the company employees 25 workers who work normal time each of 1,750 hours per year. So in order to work out a the total number of hours the 25 workers work is going to be : 25 workers X (Multiply by) 1,750 hours = 43,750 hours. This means that we would still need 50,000 hours - (Minus by) 43,750 hours = 6,250 hours. If you need to work out the total overtime hours per employee for the year then it would be 6,250 hours / (Divide by) 25 = 250 hours per employee overtime for the year needed

You are then told that each unit requires 2 kg of material so without taking into consideration wastage 100,000 units will require : 2Kg X (Multiply by) 100,000 units = 200,000 Kg. We have a contract placed for 150,000 Kg at an agreed price meaning that the other 50,000 Kg (200,000 kg - 150,000 kg) will need to be sourced from an open market. Also if you were only avaliable with 150,000 kg you will only be able to make : 150,000 kg / (Divide by) 2kg = 75,000 units

Quality control can test 8,000 units per month, that means in order to work out for the whole year it will be 8,000 units X (Multiply by) 12 Months = 96,000 Units. That means that 4,000 units will not be tested

Hope this helps you out

Kind regards

Shamil

• Registered Posts: 28
Sorry for the late reply. This has really helped! Wish AAT could provide workings for the answers. Thanks @shamil91
• Registered Posts: 94 Regular contributor ⭐ ? ⭐
Hi there,

Your most welcome, unfortunately it would take them quite a while as they would have to prepare questions for Level 2 - 4 so they do cut a few corners. I only gave you a full detailed answer so you can use it as reference for other questions gives you a better understanding

Kind regards

Shamil