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 This topic has 6 replies, 2 voices, and was last updated 6 years ago by John Moffat.

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August 12, 2016 at 1:22 pm #332849adarsh1997
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1.In a period, 12,250 units were made and there was a favourable labour efficiency variance of $11,250. If 41,000 labour hours were worked and the standard wage was $6 per hour, how many standard hours were allowed per unit?
I have got 3.19, however in the book, the answer is 3.50. Could you explain please as the workings in the book are not easy to understand.
2. A company has a single product with selling price of $12 per unit, which is calculated as variable per unit, plus 20% At an output level of 5,000 units, it makes a loss of $8,000
The answer is $18,000What does “plus 20%” mean?
– How to reach the answer.Thanks.
August 12, 2016 at 4:44 pm #332876John MoffatKeymaster Topics: 57
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1. That must have worked 11,250/6 = 1,875 fewer hours than expected.
So the expected/standard hours must have been 41,000 + 1,875 = 42,875 hours.
Therefore the standard hours per unit must have been 42,875/12,250 = 3.50 hours2. I assume is actually said “variable cost per unit plus 20%”
It means that the contribution is 20% of cost and therefore the contribution is 20/120 x selling price.
You have not said what the question wants, and so I cannot explain the answer!August 12, 2016 at 4:50 pm #332879adarsh1997 Topics: 629
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A company has a single product with selling price of $12 per unit, which is calculated as variable per unit, plus 20%. At an output level of 5,000 units, it makes a loss of $8,000
What is the company’s fixed cost?
The answer is $18,000What does “plus 20%” mean?
– How to reach the answer.August 14, 2016 at 7:59 am #333061adarsh1997 Topics: 629
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1. The cost of the factory department of C appear to have a variable element department upon the number of units produced. The fixed element of the costs step up when 20,000 units or more units are produced. At an activity level of 22,000 units, the fixed element cost is $25,000 The variable cost per unit is constant.
Volume of production:
18,000 units is $200,000
22,000 units is $245,000What would be the total cost for 19,000 units and 21,000 units?
Answer is for 19,000 units is $210,000 and for 21,000 units is $235,000Workings shown in the book are a bit confusing. Could you please make it simple to understand?
2. A company uses flexed budget. The fixed budget for last month was based on 100% activity and showed direct costs of $100,000. Last month actual direct cost were compared with the flexed budget to show the following:
Direct cost:
Actual $93,600
variance $2,400 (A)What was the actual activity as a % of the fixed budget last month?
Answer is 91.2%
How to obtain the answer?August 14, 2016 at 2:32 pm #333110John MoffatKeymaster Topics: 57
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1. You know what the fixed cost is for 22,000 units, so the total variable cost is the remainder of the cost. If you divide it by 22,000 then that is the variable cost per unit. It should then be easy to finish it.
2. The standard cost for last month must have been 93600 – 2400 = 91,200.
This is 91.2% of the fixed budget of 100,000.August 14, 2016 at 5:51 pm #333161adarsh1997 Topics: 629
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1. At 21,000 units, I do have obtained the answer which is $235,000.
However for 19,000 units, I have obtained $215,000 but in the book the answer is $210,000Could you please clarify?
Thanks.
August 15, 2016 at 6:54 am #333209John MoffatKeymaster Topics: 57
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Check for 18,000 units and you will find that the fixed overheads (without the step up) are only 20,000.

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