Sheldon Company manufactures only one product and uses a standard cost system. During the past month, manufacturing operations for the company had the following variances: direct labor rate variance = $30,000 favorable; direct labor efficiency variance = $50,000 unfavorable. Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly pay rate is $50. During the month, the company used 25% more direct labor hours than the standard allowed.

What were the total standard hours allowed (SQ) for the units manufactured during the month, rounded to the nearest whole number?
A) 1,000.
B) 2,500.
C) 4,000.
D) 5,000.
E) 6,000.

Question

Sheldon Company manufactures only one product and uses a standard cost system. During the past month, manufacturing operations for the company had the following variances: direct labor rate variance = $30,000 favorable; direct labor efficiency variance = $50,000 unfavorable. Sheldon allows 5 standard direct labor hours per unit produced, and its standard direct labor hourly pay rate is $50. During the month, the company used 25% more direct labor hours than the standard allowed.

What were the total standard hours allowed (SQ) for the units manufactured during the month, rounded to the nearest whole number?

What were the total standard hours allowed (SQ) for the units manufactured during the month, rounded to the nearest whole number?
A) 1,000.
B) 2,500.
C) 4,000.
D) 5,000.
E) 6,000.

Quizplus · Accepted Answer

Given that the company used 25% more direct labor hours than the standard allowed and had a $50,000 unfavorable efficiency variance, we can calculate the standard hours allowed (SQ). The efficiency variance formula is (Actual Hours - Standard Hours) x Standard Rate. Rearranging to find Standard Hours (SQ) = Actual Hours - (Efficiency Variance / Standard Rate). Given the efficiency variance is $50,000 unfavorable, it means actual hours exceeded standard hours. The standard rate is $50. If Actual Hours were 125% of Standard Hours (due to 25% more usage), we can denote Standard Hours as SQ and Actual Hours as 1.25SQ. Substituting these into the rearranged formula gives us SQ = 1.25SQ - ($50,000 / $50). Solving for SQ directly is complex without the actual hours, but understanding the relationship between the variance and the standard and actual hours allows us to infer that the standard hours must be a base that, when increased by 25%, results in the variance observed. Without the exact number of actual hours worked or further details, directly calculating SQ from the information provided is not straightforward. However, knowing that the direct labor efficiency variance directly relates to the difference in hours, we can infer the standard hours allowed would be a figure that, when increased by 25%, contributes to the observed variance. The correct calculation approach involves understanding the relationship between the efficiency variance and the standard and actual hours, but with the given information, a precise calculation requires additional steps or data not provided in the question.

Sheldon Company Manufactures Only One Product and Uses a Standard