Someone with the osborn MAC book...

Primble

Please explain on student activity q 3.3 how you know whether to use 2500 or 2600 hours?

pirate

Hi Primble

Do you mean 3.4
if so it depends which part of the question you are answering

K

Primble

pirate wrote: »

Hi Primble

Do you mean 3.4
if so it depends which part of the question you are answering

K

its 3.3 page 97 a and b

jewels.p

Remind me tomorrow I will have a look. My book is at work!

pirate

Hi Primble

If the absorption base is Direct Labour hours you must use the Standard Labour hours for the output. Its so that every item produced will absorb the same amount of fixed overhead even if it took longer or less time to make it.

the only variance that doesnt use the standard labour hour is the capacity
this will compate the time that the budgets production should have taken with the actual time it took.
Do this help at all.

Primble

pirate wrote: »

Hi Primble

If the absorption base is Direct Labour hours you must use the Standard Labour hours for the output. Its so that every item produced will absorb the same amount of fixed overhead even if it took longer or less time to make it.

the only variance that doesnt use the standard labour hour is the capacity
this will compate the time that the budgets production should have taken with the actual time it took.
Do this help at all.

thanks. i just got confused by there being two figures for the same thing

pirate

Hey Primble

its not really 2 figures for the same thing
I think its because this chapter is just concentrating on fixed costs.
But remember when you are doing the variances you will always work out what the standard labour should be for the actual output this is different of course to the actual labour hours used
so If they budget that it takes 2 hours per unit to produce and they budget 1000 then then the standard hours is 2 per unit and in total 2000 hours. If they make 1200 then the standard hours should be 1200 unitsx2 so 2400 hours. then of course there is the 3rd figure which is the actual hours it took which could be 2200 hours so they have been more efficient in this case.
In the example we dont know how many units they produced but we do know that the std hours for the budgeted production was £2200 and that the std hours it should have taken for the actual production (which we dont know how many units as it doesnt say but its bound to be different from the budgets production number. the Std hours it should have taken is 2500 hours but the actual is 2600, so its more than it should have been.
Hope that makes it a bit clearer.
K