Oslund Company manufactures only one product and uses a standard cost system. During the past month, the following variances were observed:
Direct labor rate variance$30,000favorableDirect labor efficiency variance 50,000unfavorableVariable overhead efficiency variance 20,000unfavorableStandard direct labor hours (DLH) per unit of output 5.00
Oslund applies variable overhead using a standard rate of $20.00 per standard DLH allowed. During the month, Oslund used 20% more DLHs than the total standard hours allowed for the units manufactured.What were the total standard DLHs (to the nearest whole number) for the units manufactured by Oslund Company during the past month?
5,000
1. Variable OH efficiency variance = Standard variable OH rate/DLH × (actual ? allowed) DLHs
2. Let X = No. of standard DLHs allowed for the units manufactured during the period
3. From (1) above: $20,000 (given) = $20.00/DLH (given) × (1.20X ? X) DLHs
4. $20,000 = $20.00/DLH × 0.20X
5. $20,000 = $4.00X
6. Therefore, X = $20,000/$4.00/DLH = 5,000 DLHs (to the nearest whole number).
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