- April 17, 2020 at 5:36 am
XYZ Co is planning to make 120,000 units per period of a new product. The following standards have been set.
Direct material A 1.2 kg at $11 per kg
Direct material B 4.7 kg at $6 per kg
Operation 1 42 minutes
Operation 2 37 minutes
Operation 3 11 minutes
Overheads are absorbed at the rate of $30 per labour hour. All direct operatives are paid at the rate of $8 per hour. Attainable work hours are less than clock hours, so the 500 direct operatives have been budgeted for 400 hours each in the period.
Actual results for the period were:
Production 126,000 units
Direct labour cost $1.7m for 215,000 clock hours
Material A cost $1.65m for 150,000 kg
Material B cost $3.6m for 590,000 kg
Could you please explain “attainable work hours” and “clock hours” ?
It is correct if I said the standard hours we have been set is the target hours we should attain. However we know that in practice we will spend more time in production so we need budget more time and it is called “clock hours”?April 17, 2020 at 9:46 am
‘clock hours’ is not a standard term that you are expected to be aware of. However it will be the hours that they are actually paid for. The attainable hours will be the hours that they actually will work.
Where did you find this question? I will be surprised if it is in a Revision Kit from one of the ACCA approved publishers.
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