The Clark Company makes a single product and uses standard costing. Some data concerning this product for the month of May follow:
-The total standard cost for direct labor for May was closest to:
A) $168,000
B) $180,000
C) $120,000
D) $161,000

Question

The Clark Company makes a single product and uses standard costing. Some data concerning this product for the month of May follow: 
-The total standard cost for direct labor for May was closest to:
A) $168,000 
B) $180,000 
C) $120,000 
D) $161,000

Quizplus · Accepted Answer

Total standard cost for direct labor can be calculated as follows:

Standard cost per unit of direct labor = 6 hours x $12 per hour = $72 
Total units produced = 5,000 
Therefore, total standard cost for direct labor = $72 x 5,000 = $360,000

However, the actual direct labor cost for the month of May was $180,000. This indicates that there was a favorable labor efficiency variance (i.e. the actual hours worked were less than the standard hours allowed).

Therefore, the closest option to the total standard cost for direct labor for May is $180,000, which is option B.

The Clark Company Makes a Single Product and Uses Standard