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- June 21, 2016 at 4:43 pm #323743
A company uses standard costing. This year the standard labour cost of a product is $180.60 per unit. The standard labour rate is $86.00 per hour. Last month 2,200 hours were worked and there was an adverse labour efficiency variance of $8,600. This variance was caused entirely by new working practices introduced by the company. The full effect of the new working practices is to be incorporated into the new standard cost of the product for next year. In addition, a labour rate increase of 10% is to be built into the new standard cost.
What is the standard cost per unit of the product for next year?
my answer is 198.66 because (180.60*10%) but i’m not sure if its the correct answer..June 21, 2016 at 4:51 pm #323746Your answer is not correct.
The new labour rate will be $86 + 10% = $94.60 per hour.
The standard hours per unit used to be 180.60/86 = 2.1 hours.
Last month they actually worked 2,200 hours but because there was an adverse labour efficiency variance it means they should have worked 2,200 – (8600/86) = 2,100 hours.
That means that they actually produce 2100/2.1 = 1,000 units.
So the new standard time per unit = 2,200/1,000 = 2.2 hours per unit.Therefore the new standard cost = 2.2 hours x $94.60 per hour = $208.12 per unit.
Why are you attempting questions for which you do not have an answer? That is pointless and you really should be using a Revision Kit from one of the ACCA approved publishers.
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