Normal Corporation uses standard costing and is in the process of updating its d

Question

Normal Corporation uses standard costing and is in the process of updating its direct materials and direct labor standards for Product 20B. The following data have been accumulated:
Direct materials in the previous period, 20,500 units were produced, and 32,800 square yards of direct materials at a cost of $122,344 were used to produce them.
Direct labor during the previous period, 57,400 direct labor hours were worked -34,850 hours on machine H and 22,550 hours on machine K. Machine H operators earned $9.20 per hour last period. A new labor union contract calls for a 10 percent increase in labor rates for the coming period.
Using this information as the basis for the new standards, , compute the direct materials quantity and price standards and the direct labor time and rate standards for each machine for the coming accounting period.

Explanation / Answer

I assumed that Machine K operators also earned $ 9.20 per hour since you didn't give any information about Machine K operators' wage.

1) direct materials quantity standard

32,800/20,500 = 1.6 square yards per unit

2) direct materials price standard

122,344/32,800 = $ 3.73 per square yard

3) direct labor time standard

a. Machine H

34,850/20,500 = 1.7 hours per unit

b. Machine K

22,550/20,500 = 1.1 hours per unit

4) direct labor rate standard

a. Machine H

9.20 * 1.10 = $ 10.12 per hour

b. Machine K

9.20 * 1.10 = $ 10.20 per hour

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