Level 4 - Standard Costing Direct Costs

ggp25

Hi, is anyone able to help with the direct material efficiency part of the question?

Many thanks in advance

shamilkaria

Hi @ggp25

I hope you are well?

To work out Budget / Standard cost of labour for actual production:

307 hours x £12.50 = £3,837.50 (Favourable as it's less than actual by £107.50 - £3,945)

Direct Labour Rate:

Standard / Budgeted Rate = £12.50 per hour

Actual Rate = £3,945 / 307 Hours = £12.85 - Rounded to 2 decimal places

The Actual Rate is Adverse by 35p per hour

Direct Labour Efficiency:

Actual Cost of Labour for 5,000 units based on 307 hours is - £3,945

Budgeted / Standard Cost - 6 hours to make 100 units. So to make 5,000 units it will be (5,000 units / 100 units x 6 Hours) = 300 Hours. Then 300 hours x £12.50 per hour = £3,750

This gives you a Adverse of £195 (£3,945 - £3,750)

Actual Cost of Labour for Actual Production:

£3,945 - Mentioned in question (Adverse as it's more than £107.50 - £3,837.50)

Hopefully this is all right, sorry I have answered this question on my mobile so the breakdown might not be as clear. If you need a clearer breakdown do let me know or if anything is wrong do let me know too, I'll log into the laptop and look at it properly again.

Kind regards

Shamil

ggp25

Thank you!

shamilkaria

Hi @ggp25

Hopefully that was all right and it helped you 🙂

ggp25

@shamilkaria are you able to help with a different question please? I am unsure on the total cost per KG part of the question? All of the other parts are fine

shamilkaria

Hi @ggp25

Sorry for the late reply.

Just wanted to make sure the Maximum Material Cost per unit is correct?

To get from 200 grams to 1Kg you would need to muliply by 5. Target cost is usually your selling price - desired profit.

ggp25

Hi @shamilkaria ,

I have just checked the answers and it is correct:

shamilkaria

Hi @ggp25

Glad you got it correct 🙂. I had to read up on Target Cost been a while since needed to use it.

But yh happy to help if you got anything else.

Kind regards

Shamil