CG Co manufactures a single product T. Budgeted production output of product T during June is 200 units. Each unit of product T requires 6 labour hours for completion and CG Co anticipates 20 per cent idle time. Labour is paid at a rate of Rs7 per hour. The direct labour cost budget for March is

A. Rs. 6,720

B. Rs. 8400

C. Rs. 10080

D. Rs. 10500

Answer: Option D

Solution(By Examveda Team)

For every 100 hours that they pay for, there are 20 hours idle and therefore 80 hours worked. So, for every 80 hours worked they will have to pay for 100 hours, again with 20 hours idle. The idle time is 20/80 = 25% of the time worked. So for this question they need 200 x 6 = 1200 hours of work. Therefore they will have to pay for 1200 x 100/80 = 1500 hours. This will cost them 1500 x Rs. 7 = Rs.10,500