Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,000 unfavorable; Direct labor efficiency variance = $70,000 (?). The standard calls for 3.0 direct labor hours per unit of output at $28.00 per labor hour (SP). The standard direct labor hours allowed for the units manufactured (SQ) is 20 percent more than the total direct labor hours worked (AQ) in August.
How many units (rounded to nearest whole number) of the product were produced in August?
5,000
1. Direct labor efficiency variance in hours = labor efficiency variance in total/SP = $70,000 (given)/$28.00/hr. (given) = 2,500 hours.
2. 2,500 hours = 20% of actual hours (given).
3. Actual hours worked, AQ = 2,500 hours/0.2 = 12,500 hours.
4. Total standard hours allowed (SQ) for this period's production = 12,500 × 1.20 = 15,000 hours.
5. Standard number of labor hours per unit produced = 3.00 (given).
6. Therefore, number of units produced in August = total standard hours allowed for this period's production (SQ)/standard # of labor hours/unit = 15,000 hours (see (4) above)/3 hours per unit (given) = 5,000 (rounded to nearest whole number)
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