question archive Each unit of product E takes five direct labour hours to make
Each unit of product E takes five direct labour hours to make
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Each unit of product E takes five direct labour hours to make. Quality standards are high, and 8% of units are rejected after completion as sub-standard. Next month's budgets are as follows. Opening stocks of finished goods 3,000 units Planned closing stocks of finished goods 7,600 units Budgeted sales of E 36,800 units All stock of finished goods must have successfully passed the quality control check. What is the direct labour hours budget for the month? 223.560 hours 225,000 hours O 200,000 hours 198.720 hours
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Required production (assuming no quality check) = Sales + Closing stock - Opening stock
= 36800 + 7600 - 3000 = 41400.
But 8% units are rejected, hence required units of production = 41400 ÷ 92 x 100 = 45000 units.
Each unit requires 5 hours of direct labour.
So Budgeted direct labour hours = 45000 x 5 = 225,000 hours.
Hence correct answer is Option B.
