In the month of January, 300 labour hours were worked for a total cost of Rs 4800. The variable overhead expenditure variance was Rs 600 (A). Overheads are assumed to be related to direct labour hours of active working. What was the standard cost per labour hour? Question 10Answer a. 14 b. 16 c. 18 d. 34
To find the standard cost per labour hour, we first need to determine the total standard cost of the labour hours worked.
Let’s denote:
The total actual cost can be expressed as: [ \text{Total Actual Cost} = \text{Total Labour Cost} + \text{Total Variable Overhead Cost} ]
Given that the total actual cost is Rs 4800 for 300 hours, we can express it as: [ 4800 = 300S + \text{Total Variable Overhead Cost} ]
Now, since the variable overhead expenditure variance is Rs 600 (A), we can express the total variable overhead cost as: [ \text{Total Variable Overhead Cost} = \text{Standard Variable Overhead Cost} + 600 ]
The standard variable overhead cost for 300 hours is: [ \text{Standard Variable Overhead Cost} = 300V ]
Thus, we can rewrite the total actual cost equation as: [ 4800 = 300S + (300V + 600) ]
Rearranging gives: [ 4800 = 300S + 300V + 600 ] [ 4800 - 600 = 300S + 300V ] [ 4200 = 300S + 300V ]
Dividing the entire equation by 300: [ 14 = S + V ]
This means that the sum of the standard cost per labour hour (S) and the standard variable overhead cost per labour hour (V) is Rs 14.
To find the standard cost per labour hour (S), we need to consider that the variable overheads are included in the total cost. However, we do not have enough information to separate S and V without additional data.
Given the options provided, we can assume that the standard cost per labour hour (S) is likely to be one of the options. Since we know that ( S + V = 14 ), we can check the options:
Since the only feasible option that fits the equation ( S + V = 14 ) is ( S = 14 ) with ( V = 0 ), we can conclude that the standard cost per labour hour is:
Answer: a. 14