Question

Question 2

Norio Manufacturing uses powdered plastics (PPS) to manufacture a high-pressure board used in a digital equipment product, Flex 10. Information concerning its operation in June is as follows:

Budgeted units of Flex 10 for June		6,800
Budgeted usage of PPS		61,200	pounds
Actual number of units of Flex 10 manufactured		5,800
PPS purchased		72,960	pounds
PPS used		57,000	pounds
Total actual cost of PPS used	$	368,220
Direct materials usage variance	$	36,480	unfavorable

Assume that Norio does not maintain an inventory of materials, so that the amount of materials used is equal to the amount of materials purchased. The cost of PPS in the flexible budget for the number of units manufactured this period (rounded to nearest dollar) is:

Multiple Choice

• $396,720.

• $392,160.

• $554,496.

• $465,120.

• $516,800.

Lucky Company's direct labor information for the month of February is as follows:

Actual direct labor hours worked (AQ)		57,600
Standard direct labor hours allowed (SQ)		60,000
Total payroll for direct labor	$	720,000
Direct labor efficiency variance	$	27,840

The total standard direct labor cost allowed for February, rounded to the nearest dollar, was:

Multiple Choice

• $668,160.

• $682,560.

• $696,000.

• $710,400.

• $720,000.

Answer 1

	(i)	Calculation of cost of PPS in flexible budget for unit manufactured:-
		Material Usage Variance	=( Standard Qty - Actual Qty ) X Standard Rate
			-36,480	= ( 52,200 - 57,000 ) X Standard Rate
			-36,480	= - 4,800 X Standarad rate
			Standard Rate	= -36,480 / -4,800
			Standard Rate	= $ 7.6 per unit
		Cost of flexible Budget	= Standard Qty X Standard Rate
				= 52,200 X 7.6
				=$ 396,720
		Option 1 is correct i.e. $ 396,720
	(ii)	Calculation of standard direct labor cost
		Direct labour efficiency variance = (Standard hours - Actual Hours ) X Standard Rate
			27,480	= (60,000 - 57,600 ) X Standard Rate
			27,480	= 2,400 X Standard Rate
			Standard Rate	= 27,480 /2,400
			Standard Rate	= S 11.60 per hour
		Standard direct labor cost	= Standard Hour X Standard Rate
				= 60,000 X 11.60
				= $ 696,000
		Option 3 is correct i.e. $ 696,000