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- June 7, 2017 at 4:09 pm #391363
Question
Brake Ltd. manufactured and distributes brake discs to the automotive sector. The company operates an integrated standard cost system in which.– Purchases of materials are recorded at standard cost
– Direct Material costs and direct labour costs are variable
– Production overheads are fixed and absorbed using direct labour hours.Actual and budgeted data for May are shown below
– Budgeted direct materials per unit 0 2kg at $5/kg
– Direct Labour – 0.5/unit
– Budgeted production for the month was 10,000 units
– 22,500 kgs of materials were purchased
– The total standard cost of the materials was $115,000
-6000 direct labour hours were worked at a cost of $6/hour.
-Budgeted fixed production o/h in the period were $240000.
-Actual fixed production o/h in the period were $260000.Variances calculated for may are as follows:
-material price variance $11250(A)
-labour efficiency variance $1750(A)q-5: CALCULATE THE STANDARD RATE PER LABOUR HOUR.
(THE ANSWER SAYS $7, I can’t figure out how it comes down to $7. please help!)
June 7, 2017 at 4:18 pm #391365Labour efficiency variance= (Ah-Sh) x Sr = 1750
= (6000-5750) X sr = 1750
sr>> 1750/250= $7.Is my explanation correct Sir?
June 7, 2017 at 5:40 pm #391461Yes – that is correct 🙂
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