Level 4  Standard Costing Direct Costs
ggp25
Registered Posts: 16 New contributor 🐸
Hi, is anyone able to help with the direct material efficiency part of the question?
Many thanks in advance
Many thanks in advance
0
Comments

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
Shamil0 
Thank you!0

0

@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
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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.0 
0

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
Shamil0 
Are you able to confirm how to get to the target cost per KG as I’m still a little confused0

Hi @ggp25
It's all about understanding the metric conversion. So you have worked out that the maximum you can per unit is £4 but that is for 200 grams.
They then ask you per kilogram. Kilo is 1kg which is 1000 grams. So what they did was how many 200 grams go into 1000 grams (which is 1kg or kg). 5 x 200 grams = 1kg. So the target cost for 1kg is £4 (200 grams) x 5 = £20
For example if they said 5kg that would be 5000 grams. Then it would be 5000 grams / 200 grams = 25. So that means it would be 25 x £4 = £100
Hope this helps you.
Kind regards
Shamil0 
Thank you0

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