Asked by Lissette Castaneda on Jul 28, 2024
Verified
The Fime Corporation uses a standard costing system. The following data have been assembled for December: The standard hours allowed for December's production is:
A) 5,100 hours
B) 5,400 hours
C) 5,700 hours
D) 6,000 hours
Standard Hours Allowed
The number of hours that should have been worked for the actual production achieved, based on pre-established standards.
Standard Costing System
A cost accounting method that assigns a fixed cost to inventory and measures variances against actual production costs to manage business expenses.
- Examine the information to ascertain the allotted standard hours for production operations.
Verified Answer
Actual production = 1,400 units
Standard cost per unit x actual production = $16 x 1,400 = $22,400
Actual cost of labor for December = $23,130
Variances:
Labor rate variance = ($23,130 - (1,500 x $15)) = $630 U
Labor efficiency variance = (1,400 units x 0.4 hour per unit) - actual hours worked = 100 hours U
Total labor variance = $630 U + 100 hours U x $40 per hour = $7,630 U
To calculate the standard hours allowed, we need to add the actual hours worked to the labor efficiency variance:
Actual hours worked + labor efficiency variance = 4,500 + 100 = 4,600 hours
Therefore, the standard hours allowed for December's production is 5,400 hours (4,600 actual hours worked + 800 labor efficiency variance hours).
Learning Objectives
- Examine the information to ascertain the allotted standard hours for production operations.
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