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Sir 2 questions from Kaplan f2 exam kit
1. The following information relates to labour costs for the past month:
Budget : labour rate = £10 p.h production time= 15000 hrs time per unit . time per unit = 3hrs. Production units= 5000
Actual: wages paid = £176000. Production : 5500 units. Total hours worked= 14000 hours . no idle time.
What were the labour rate and efficiency variances?
They say £36000 adverse and £25000 favourable . can you please kindly explain how they got the answer and why its adverse and favourable . I know adverse means less profit and favourable means more but for clarification2. Service costing question: the following figures relate to two electric supply companies. A and B
Total cost ($000). A= 600. B= 1000
Units sold (millions) A = 2880 B= 9600
No. Of consumers (thousands) A= 800 B= 1600
Sales of electricity (millions) A= $18. B = $50Answer is company a is less efficient than B . can you please explain how they got this answer as simply as you can .
Thank you very much,
Mij1. The hours worked should cost 14,000 x $10 = $140,000. They actually cost $176,000.
So the variance is 36,000. The spent too much so it is adverse.The should have worked 5,500 x 3 = 16,500 hours. They actually worked 14,000 hours. So they were faster by 2,500 hours.
At $10 per hour this saves them $25,000. They are saving hours so it is favourable.You really should watch the free lectures on variances because these two are very easy variances. (Our lectures are a complete course covering everything you need to be able to pass the F2 exam well).
2. The cost per unit for A = 600/2880
For B it is 1,000/9,600The cost per unit is lower for B than for A therefore B is producing more efficiently.
Sir, you are a lifesaver i don’t know what i would do without you. Iv’e studied the whole F2 syllabus with OT lectures and notes however, i may need to recap those technical areas again. keep going strong sir.
Speak to you soon, Mij
Thank you 🙂
I am please that you are sorted out on these two questions.A unit of product L requires 9 active labour hours for completion. The performance standard for product
L allows for ten per cent of total labour time to be idle, due to machine downtime. The standard wage
rate is $9 per hour. What is the standard labour cost per unit of product L?
Sir I am don’t understand this question .Please do start a new thread in future when it is a different question.
For every 10 hours paid, 10% will be idle and therefore only 9 hours will be worked.
The cost of working 9 hours is therefore the cost of paying for 10 hours, which is $90.
A company manufactures a single product L, for which the standard material cost is as follows.
$ per unit
Material 14 kg ? $3 42During July, 800 units of L were manufactured, 12,000 kg of material were purchased for $33,600, of
which 11,500 kg were issued to production.SM Co values all inventory at standard cost.
What are the material price and usage variances for July?
sir I don’t understand. please help mePlease read again what I replied before!
In order to work 9 hours they need to pay for 10 hours and 1 hour will be idle.
With regard to your question on variances – first you must start a new thread when it is a different topic. Secondly, have you watched the free lectures on variances (because all the rules needed for this question are explained in the lecture!) ?
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