The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August:
Actual cost of direct material purchased and used: £65,560
Material price variance: £5,960 unfavourable
Total materials variance: £22,360 unfavourable
Standard cost per pound of material: £4
Standard cost per direct labour hour: £5
Actual direct labour hours: 6,500 hours
Labour efficiency variance: £3,500 favourable
Standard number of direct labour hours per unit of Roff: 2 hours
Total labour variance: £400 unfavourable
-The total number of units of Roff produced during August was
A)10,800.
B)14,400.
C)3,600.
D)6,500.

Question

Quizplus · Accepted Answer

To find the total number of units of Roff produced, we can use the information about the standard number of direct labour hours per unit and the actual direct labour hours. Given that the standard is 2 hours per unit and there were 6,500 actual direct labour hours, we divide 6,500 by 2 to get 3,250 units. However, this calculation was based on a misunderstanding of the provided data. The correct approach involves analyzing the material variance to find the quantity of material used and then using the standard material quantity per unit to find the production volume. The correct calculation, based on the total material variance and the price variance, would lead to the accurate determination of the number of units produced. My initial explanation incorrectly focused on labor hours without properly accounting for the material variances and their impact on determining the production volume.

The Geurtz Company Uses Standard Costing