Page 157 - P1 Integrated Workbook STUDENT 2018

Budgeting

Example 3

ABC has determined that their production budget for product X next year will
be 10,500 units. Every unit of product X is expected to use 1.5 hours of labour
time and the expected labour cost per hour is $10.

Calculate the budgeted labour cost.

Solution

Labour hours = production budget × standard labour time per unit

Labour hours = 10,500 units × 1.5 hours = 15,750 hours

Labour cost = labour hours × cost per hour

Labour cost = 15,750 hours × $10/hour = $157,750

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