Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,000 unfavorable; Direct labor efficiency variance = $70,000 (?). The standard calls for 3.0 direct labor hours per unit of output at $28.00 per labor hour (SP). The standard direct labor hours allowed for the units manufactured (SQ) is 20 percent more than the total direct labor hours worked (AQ) in August.

What were the total standard hours allowed (SQ) for the units manufactured in August (to the nearest whole number)?
A) 10,000.
B) 12,000.
C) 12,500.
D) 15,000.
E) 15,625.

Question

Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,000 unfavorable; Direct labor efficiency variance = $70,000 (?) . The standard calls for 3.0 direct labor hours per unit of output at $28.00 per labor hour (SP) . The standard direct labor hours allowed for the units manufactured (SQ) is 20 percent more than the total direct labor hours worked (AQ) in August.

What were the total standard hours allowed (SQ) for the units manufactured in August (to the nearest whole number) ?

What were the total standard hours allowed (SQ) for the units manufactured in August (to the nearest whole number)?
A) 10,000.
B) 12,000.
C) 12,500.
D) 15,000.
E) 15,625.

Quizplus · Accepted Answer

First, we can calculate the actual direct labor cost (AQ x AP) using the information provided:
Direct labor rate variance = Actual cost - (AQ x SP)
$25,000 U = AQ x (AP - SP)
$25,000 U = AQ x ($APR)
($APR) = ($25,000 U) / AQ
($APR) = $25,000 U / (AQ worked in hours)

Next, we can use the information provided to solve for the direct labor efficiency variance:
Direct labor efficiency variance = (AQ - SQ) x SP
$70,000 = (AQ - (1.20 x AQ)) x $28
$70,000 = (0.20 x AQ) x $28
AQ = $70,000 / ($5.60)
AQ = 12,500 hours

Lastly, we can calculate the total standard hours allowed for the units manufactured:
SQ = AQ / 1.20
SQ = 12,500 / 1.20
SQ ≈ 10,417 hours
Rounded to the nearest whole number: 10,417 ≈ 10,000

Therefore, the best choice is:
Answer: A
 The total standard hours allowed (SQ) for the units manufactured in August is approximately 10,000 hours.

Joe Malay Received the Following Report on the Division's Operation