Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Standard Costing – Variances – Trying to calculate standard rate per labour hour
- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
John Moffat.
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- April 5, 2016 at 8:43 am #309037
I’m a newcomer to your site and forum and I have started studying the ACCA F2 FMA.
Unfortunately, I’ve become stuck on a question which falls under Standard Costing- Variances. The question is as follows:
Car Company manufacturers & distributes brake discs to the car industry. The company operates integrated Standard Costing system where:
Purchases of materials are recorded at standard cost
Direct materials & labour costs are variable
Production overheads are fixed & absorbed using direct labour hoursActual & Budgeted data for May is as follows:
Budgeted Direct Materials per unit – 2kg at £5 per kg
Direct labour – 0.5 hrs per unit
Budgeted production for the month – 10,000 units
22,500 kg of materials were purchased
Total standard cost of materials were £115,000
6000 direct labour hours were worked at £6 per hour
Budgeted Fixed production overheads were £240,000
Actual Fixed production overheads were £260,000Variances for May were:
Material Price variance £11,250 Adverse
Labour efficiency variance £1,750 AdverseQuestion:
Calculate the Actual number of brake discs produced?My answer was as follows:
£115,000 / (2kg * £5) = £115,000 / £10 = 11,500 unitsHowever, I have now become completely stuck on the following question and would be grateful for your assistance please.
Question:
Calculate the standard rate per labour hour ?Thank you
April 5, 2016 at 9:04 am #309044The standard hours for the actual production = 11,500 x 0.5 = 5,750 hours.
Since they actually took 6,000 hours, the efficiency variance is 250 hours.Therefore the standard rate per hour = 1750 / 250 = $7
(Have you watched our free lectures on variances? Our lectures are a complete course for Paper F2 and cover everything needed to pass the exam well.)
April 5, 2016 at 9:25 am #309052Thank you very much for your assistance John. I’m grateful.
I shall indeed start to use your course materials including the lecture on variances, alongside my study materials. Thank you for your guidance.
Kind regards
April 5, 2016 at 7:17 pm #309103You are very welcome 🙂
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