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if it takes 1 hr as standard time for a labour to complete a unit. In case a labour take 1.5hr in completing that. Will the direct labour cost of the cost unit be costed at 1 hr labour charge or 1.5 hr labour charge?
similarly if standard of raw material set for each cost unit is 4 kg but it actually taken 5 kg due to wastage.
In all these case the cost card of the unit will value the prime cost of the unit based on standard labour time and standard material usage or on the basis of actual labour time and actual material. Please clarify this thing sir. this question came to my mind while doing variance chapter.
The cost cards use the standard time and standard usage.
The variances measure how much the actual time and usage differ from standard.
okay
i have solved some question from labour chapter. Questions were like
A labor worked – 8 hrs
Units completed – 80 units
Standard time to produce one unit – 9 mins
Bonus payable at – 70% of time saved
Basic Pay – 5$So we calculate direct labor cost as (8 hrs x 5) = $40
While bonus is $14 based on 70% rate of 4 hrs saved as per standardSo the actual direct labor cost incurred = $40 for 80 units
But as per standard it should have been (12 hrs x5) = $60So as u have said
the cost card will show $60 as per standard
but the actual is $40
From that we will do variance measures
Am i right?and last question when the product is finished will we cost that as per standard cost card time and rate or as per actual time and rate i.e; like here do we include $40 or $60 as labor cost into the finished stock value
Likewise do we cost the finished goods as per standard material usage cost or as per actual material usage cost so that we can find out the product value…………….this is where i’m confusing at.Plz clear it out sir
or it depends upon company whether they cost inventory at standard or at actual………both way its possible.
But the question you have typed will have asked what the total pay will have been.
That has nothing to do with what would be on the cost card or what the variances would be (and you would not be asked that for this question).
yes this question ask for total pay but seeing the question it arrives that it took lees time to produce the units than the standard time which results in lower direct cost. So this question came to my mind that when the actual cost is different than the standard cost then which cost will i use to value the finished goods.
I am trying to figure that out for the bigger picture otherwise a sort of gap remains.So i hope if u could explain it in short that will be very much helpful.Thank You Sir.
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