Oslund Company manufactures only one product and uses a standard cost system. During the past month, the following variances were observed:$\begin{array}{lc}
\text { Direct labor rate variance } & \$ 30,000 \text { favorable } \
\text { Direct labor efficiency variance } & 50,000 \text { unfavorable } \
\text { Variable overhead efficiency variance } & 20,000 \text { unfavorable } \
\text { Standard direct labor hours (DLH) per unit of output } & 5.00
\end{array}$Oslund applies variable overhead using a standard rate of $20.00 per standard DLH allowed. During the month, Oslund used 20% more DLHs than the total standard hours allowed for the units manufactured.

What were the total standard DLHs (to the nearest whole number) for the units manufactured by Oslund Company during the past month?
A) 1,000.
B) 2,500.
C) 4,000.
D) 5,000.
E) 6,000.

Question

Oslund Company manufactures only one product and uses a standard cost system. During the past month, the following variances were observed:$\begin{array}{lc}
\text { Direct labor rate variance } & \$ 30,000 \text { favorable } \
\text { Direct labor efficiency variance } & 50,000 \text { unfavorable } \
\text { Variable overhead efficiency variance } & 20,000 \text { unfavorable } \
\text { Standard direct labor hours (DLH) per unit of output } & 5.00
\end{array}$Oslund applies variable overhead using a standard rate of $20.00 per standard DLH allowed. During the month, Oslund used 20% more DLHs than the total standard hours allowed for the units manufactured.

What were the total standard DLHs (to the nearest whole number) for the units manufactured by Oslund Company during the past month?
A) 1,000.
B) 2,500.
C) 4,000.
D) 5,000.
E) 6,000.

Quizplus · Accepted Answer

The unfavorable direct labor efficiency variance indicates that more hours were used than allowed. If 20% more DLHs were used, then the actual DLHs were 120% of the standard DLHs. Let x be the standard DLHs. Then, 1.2x = actual DLHs. The variable overhead efficiency variance is $20,000 unfavorable, calculated as $20 * (actual DLHs - standard DLHs). Solving for x gives 5,000 standard DLHs.

Oslund Company Manufactures Only One Product and Uses a Standard