Solving for Materials and Labor

question 43

Essay

Solving for materials and labor.Clayton Company makes fireplace screens.Under the flexible budget,when the firm uses 75,000 direct labor hours,budgeted variable overhead is $75,000,whereas budgeted direct labor costs are $450,000.The company applies variable overhead to production units on the basis of direct labor hours.All data apply to the month of February.The following are some of the variances for February (F denotes favorable;U denotes unfavorable):

During February,the firm incurred $400,000 of direct labor costs.According to the standards,each fireplace screen uses one pound of materials at a standard price of $4.00 per pound.The firm produced 100,000 fireplace screens in February.The materials price variance was $0.30 per pound,whereas the average wage rate exceeded the standard average rate by $0.50 per hour.
Required:
Compute the following for February,assuming there are beginning inventories but no ending inventories of materials:
a.pounds of materials purchased
b.pounds of material usage over standard
c.standard hourly wage rate
d.standard direct labor hours for the total February production

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Definitions:

Economic Efficiency

A condition where every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Ability-To-Pay Principle

The ability-to-pay principle in taxation suggests that taxes should be levied based on an individual's or entity's capacity to pay, meaning those with higher income should pay more.

Cigarette Taxes

Taxes imposed on the sale of cigarettes to discourage consumption and raise government revenue, often used for public health initiatives.

Wedge

The difference between the demand price of the quantity transacted and the supply price of the quantity transacted for a good when the supply of the good is legally restricted. Often created by a quantity control, or quota.