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Hi, I have completed the Mock exam here but i think one of the answers is incorrect.
The question is:
Company has budgeted labour cost of $180,000 for the production of 30,000 units per month. Each unit is budgeted to take 3 hours of labour. Actual cost is $160,000 for 28,000 and 85,000 hours were worked.
What is the labour efficiency variance?
I have got the answer to be $2,000 adverse. But apparently it is $2,000 favourable.
For me Actual hours were 85,000. It should have take 84,000 so it should be adverse, no?
You are correct – the answer is adverse.
I do apologise. I was certain that I had corrected this some time ago – I will check with admin as to why the corrected version has not been uploaded.
Sorry again 🙁
It is my fault – I have checked, and I had not sent the corrected version to admin 🙁
I have done now. Thank you for letting me know.
No problem. Apologies for posting this twice. My browser refreshed by accident.
There is another question on the test but this time i do not know how to arrive at the answer. The question is:
A company operates a process costing system. WIP at start of process of 500 units ($4000) which were 30% complete. Total of 2000 units were completed and transferred to finished goods warehouse. Cost per equivalent unit for output produced during the month was $30. Company uses FIFO method. What is the total cost of the 2,000 units transferred to the finished goods warehouse?
(I will answer this question, but in future please ask in the F2 Ask the Tutor Forum if you want me to answer. This forum is for students to help each other 🙂 )
2000 units were output. The first 500 of these were once which had already been started last period.
So the cost of these 500 is the 4,000 spent last period, plus the cost of finishing them at this periods prices, which is 500 x 70% x $30.The remaining 1500 of output were all made in this period and so the cost of these is 1500 x $30 = $45,000
The total cost is the two added together.
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