Labour budgeted is prepared using the production budget data. This is simply because the budgeted labour hour is a function of the budgeted production units.
Budgeted labour hours = Production budget × standard hours per unit
= 380 × 1.5 hours=570
Budgeted labour cost= Budgeted labour hours × Standard labour rate
Value chain refers to various linked activities in creating a product wherein at each stage, certain value is added. The concept was given by Michael Porter.
Porter divided the value chain activities into two groups i.e primary activities and secondary or support activities.
As the name suggests, support activities refer to those activities which aid or support the primary activities.
One of the support activities mentioned by Porter is the Infrastructure, which includes accounting function of an enterprise.
Base on the scenario been described in the question, we can see that for each one percentage point increase in the interest rate, the level of spending investment is declining by $0.5 billion. For this reason it will make the investment spending to fall by $0.5 billion when the interest rate changes as we have seen in the first interest rate calculated.
