• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

New! BPP Books for ACCA September 2022 Exams are now available, get your discount code >>

standard costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › standard costing

  • This topic has 3 replies, 2 voices, and was last updated 10 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 9, 2021 at 1:26 pm #630896
    Arshi-16
    • Topics: 17
    • Replies: 5
    • ☆

    kaplan exam kit pg no:253.Ans 171 why $10 is taken as per hour standard labour rate?

    August 9, 2021 at 4:39 pm #630913
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    I do not have the Kaplan Exam Kit (only the BPP Revision Kit).

    If it is labelled as being a past exam question then tell me the name of it (and the date of the exam) because I do have all past exam questions.

    August 9, 2021 at 5:10 pm #630924
    Arshi-16
    • Topics: 17
    • Replies: 5
    • ☆

    Q) When considering setting standards for costing, which of the following would NOT be
    appropriate?
    A The normal level of activity should always be used for absorbing overheads
    B Average prices for materials should be used, encompassing any discounts that are
    regularly available
    C The labour rate used will be the rate at which the labour is paid
    D Average material usage should be established based on generally-accepted working
    practices

    This is the question

    ans) C

    The standard labour rate should be the expected rate/hour, but allowing for standard levels
    of idle time. For example, if the work force is paid $9 per hour but idle time of 10% is
    expected, the standard labour rate will be $10 per hour ,not $9

    And this is the answer

    My doubt is that why they take $10?

    August 9, 2021 at 5:23 pm #630927
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49598
    • ☆☆☆☆☆

    On the standard cost card, for labour we take the hours worked per unit multiplied by the labour cost per hour.

    However, we need to use the cost per hour for hours actually worked.

    Here is a different example. Each unit takes 9 hour to make. 10% of the hours paid are idle. Labour is paid at the rate of $18 per hour.

    Because 10% of the hours paid are idle, it means that only 90% of the hours paid for are actually working hours.

    Therefore, to have 9 working hours we need to pay for 9/90% = 10 hours. (We pay for 10 hours, 1 hours is idle and so 9 hours are actually working).

    Therefore the cost of the 9 working hours means paying for 10 hours at $18 per hour which is $180. So the cost of each working hour is 180/9 = $20.

    (and on the cost card we would show labour as being 9 hours at $20 per hour = $180 per unit).

    It might help you to watch my lecture on Advanced Idle Time Variances. They are not often asked in the exam, but the same problem (with calculations) arises 🙂

    (The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well 🙂 )

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate

If you have benefited from OpenTuition please donate.

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • jingdong on Pensions (IAS 19) – Introduction – ACCA (SBR) lectures
  • jingdong on Pensions (IAS 19) – Example – ACCA (SBR) lectures
  • Joanne94 on The Management Accountant’s Profit Statement – Marginal Costing – ACCA Management Accounting (MA)
  • mannannagpal on Sources of data – ACCA Management Accounting (MA)
  • mannannagpal on Sources of data – ACCA Management Accounting (MA)

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy