Question 2

The following information relates to the polishing section of the furniture assembly
department of Cooper Highlife Ltd, for the budget year, Year 9:
(1)
Planned output of polished units:
Product XR9
1,000 units
Product XT69
1,600 units
Product XM3
530 units
(2)
This output is expected to be evenly spread over the 50-week production
(3)

(4)

year.
Standard polishing times in hours per unit:
Product XR9
2.5
Product XR6
3.2
Product XR3
6.0
10% of the attendance time of direct operatives will be preparation and
cleaning time. This is not allowed for in the standard polishing times give in

(5)

(3).
Two indirect workers will also be employed, each attending for a 44-hour
week. Four of these hours will be overtime, payable at time and a half. Direct

(6)

operatives work a basic 40-hour week and do not work any overtime.
Budget rates of pay per attendance hour are:

(7)

Direct operatives
RM8.40
Indirect operatives
RM6.10
Two weeks holiday pay at basic rates (excluding overtime) should be

(8)

provided for both direct and indirect operatives.

The polishing section supervisor receives a salary of RM20,000 per annum.
REQUIRED:
(i) Prepare a budget for all labour costs of the polishing section for Year 9,
analyzed under appropriate headings. Your answer should show
clearly the number of direct operatives to be employed.
(12 marks)
(ii) From the following information which relates to Week 1 of Year 9,
calculate:
(a)
The Production Volume ratio (or Activity ratio)
(b)
The Efficiency ratio
Units polished:
Product XR9

17 units

Product XT6

40 units

Product XM3

4 units

Direct operative hours:

Attended
Preparation/Cleaning

240 hours
30 hours

Productive hours

210 hours
(8marks)
(Total 20marks)

Suggested Answer 2

(i)

LABOUR BUDGET FOR YEAR 9- POLISHING SECTION

Normal Attendance

Overtime

Holiday

Pay

Pay

Pay

RM

RM

Total
RM

RM

Direct labor cost

Direct operatives (12,000 x RM8.40) 100,800

100,800

Indirect labor cost

(6 workers x 40

Direct operatives

x 2 wks x 8.40)

(2 workers x 40 x

Indirect operatives 50 wks x RM6.10)

4,032

4,032

(2 x 4 x 50 x

24,400 RM6.10 X 1.5)

3,660 (2 X 40 X 2 X 6.10)

976

29,036

Supervisors salary

20,000

Total labor cost budget

153,868

No. of Direct Operatives=

Budget Standard Hours( Attendance)

Attendance Hours per Operative
12,000
2, 000

=6

(ii)(a) Production Volume Ratio

(or Activity Ratio)

Standard Hours of Actual Production (W 2)

x100%
Budget Standard Hours(W 3)

194.5
x100%
216

=90.05%

(b) Efficiency Ratio

Standard Hours of Actual Production

x100%
Actual Hours Worked

194.5
x100%
210

=92.62%
WORKINGS:
(1) Polishing Section
XR9
Standard hours per unit
2.5
Budgeted output (units)
1,000
Budgeted standard hours 2,500
Preparation& Cleaning time
(10% of attendance time)
Budgeted attendance time per year
Per direct operative
No. of weeks per year
Less: No. of weeks holiday

Product
XT6

XM3

3.2
1,600
5,120

6
530
3,180

Total

10,800
1,200

90
10

12,000

100

52
2
50

No. of weeks productive

x Attendance hours per week

x 40

Total attendance hours per year

2,000

(2) Standard (Polishing) Hours of Actual Production

Product
XR9
XT6
XM3

Actual Productions
(Unit)
17
40
4

Standard Polishing Hours

Per Unit
2.5
3.2
6.0

Standard Hours
of Actual Production
42.50
128.00
24.00
194.50

(3)

Budgeted Standard Hours

Product
XR9
XT6
XM3

Budgeted Production/work Standard Polishing Hours

(Unit)
Per Unit
(1,000/50 wks) 20.00
2.5
(1,600/50 wks) 32.00
3.2
( 530/50 wks) 10.60
6.0

Budgeted Standard
Hours
50.00
102.40
63.60
216.00