Standard Costing- Standard Hours Question

System

Can someone help me get my head around a concept?

I am having trouble understanding what is meant by Standard Hours. This is the kind of context I mean:

Osborne Books Managing Resources and Performance, p82 wrote:

*The budgeted production level is 5000 standard hours. This will enable the absorption rate of £3.00 per hour to absorb the budgeted fixed overheads of £15,000.
*Actual fixed overheads amount to £13,000
*Actual output is 5,800 standard hours
*Actual time taken to achieve output is 5,500 hours

Does this mean that the level of output was 5,800 labour-hours, but it only took 5,500 actual labour-hours to do it? That is to say with 5500 resource units the output was that expected of 5800?

System

Re:Standard Costing- Standard Hours Question

Hi

For budgeted production it needs to be calculated how much time the units should take to produce i.e. 5000 standard hours and then the fixed overheads can also be calculated.

When the goods are actually produced you need to find out how actual production compares with your budget. Therefore it needs to be calculated how long the actual units took to make (for variance purposes) using standard hours from your budgeted figures i.e. 5,800, and compare it to what was actually produced 5,500 hours.
Clear as mud?
Eva