Question

Queen Industries uses a standard costing system in the manufacturing of its single product. It requires 2 hours of labor to produce 1 unit of final product. In February, Queen Industries produced 15,000 units. The standard cost for labor allowed for the output was $97,500, and there was an unfavorable direct labor time variance of $4,600.

How many actual hours were worked ? [Hint: Round your answer in 2 decimal places]

Your Answer:

Answer 1

Answer)

Calculation of Actual labor hours worked

Labor efficiency variance = (Standard Labor hours allowed for actual output – Actual Labor hours Worked) X Standard rate per labor hour

-$ 4,600 = (30,000 labor hours – Actual labor hours worked) X $ 3.25 per labor hour

- $ 4,600/ $ 3.25 = 30,000 – Actual labor hours worked

- 1,415.38 = 30,000 – Actual labor hours worked

Actual labor hours worked = 30,000 + 1,415.38

                                                 = 31,415.38

Therefore actual labor hours worked are 31,415.38

Note: Labor time variance is also known as labor efficiency variance.

Working Notes:

Calculation of standard labor hours allowed to produce 15,000 units

Standard Labor hours allowed to produce 15,000 Units = Standard Labor hours allowed to produce one unit X Actual Number of units produced

                                                                                                       = 2 Labor hours per unit X 15,000 units

                                                                                                      = 30,000 labor hours

Therefore standard labor hours allowed to produce 15,000 units are 30,000.

Calculation of Standard rate per labor hour

Standard rate per labor hour = Standard labor cost allowed/ Standard labor hours allowed

                                                     = $ 97,500/ 30,000 Labor hours

                                                   = $ 3.25 per labor hour