ACCA Applied Knowledge · Management Accounting · Budget preparation
Ferro Co has a labour budget of 12,000 hours for a month. Employees work a 160-hour month each, but 5% of the time paid is lost to idle time and no overtime is worked. What is the minimum number of employees needed to deliver the budgeted productive hours?
At least 79 employees are needed. Each employee gives 152 productive hours after 5% idle time, and 12,000 divided by 152 is about 78.9, which must be rounded up to 79 whole employees. Ignoring idle time gives only 75.
- A75 employees
- B79 employeesCorrect
- C72 employees
- D80 employees
Explanation
Productive hours per employee = 160 x 95% = 152. Employees needed = 12,000 / 152 = 78.9, so 79 employees are needed. 75 ignores idle time, and 72 deducts idle time the wrong way.
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