Fifteen Minutes of Direct Labour Is Needed to Produce One

question 57

Multiple Choice

Fifteen minutes of direct labour is needed to produce one unit of product and direct labour is paid $20 per hour. Budgeted output for the period is estimated to be 14 000 units. Actual output for the period turns out to be 14 600 units and actual labour costs are $77 900. What budgeted direct labour amount should actual direct labour costs be compared to in order to calculate a valid variance?

• A) $70 000
• B) $73 000
• C) $56 000
• D) $58 400

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Definitions:

Hiring And Training Cost

Expenses associated with recruiting new employees and providing them with the necessary training to perform their job duties.

Labor Hours

The total number of hours worked by employees for the production of goods or the provision of services.

Inventory Holding Cost

The total cost of storing and managing goods that a company has in stock, including warehousing and insurance.

Forward Buying

Forward buying is a purchasing strategy where buyers purchase larger quantities than immediately needed to take advantage of lower prices or to ensure supply against future shortage.