Selection of Labor Standards. Four employees each work 38 hours a week in an assembly operation. Standard production for the week was established at 2,280 assemblies or at a rate of production of 15 assemblies per labor hour. A time study person has observed that it is possible to make 20 assemblies an hour, and this rate has been set as the new standard.

Production data for one week under the new standard are as follows:

The standard labor rate per hour is \(\$ 12\). During this week, an unfavorable materials usage variance due solely to above normal scrap and waste was \(\$ 2,500\). Also, 500 units that had been fully assembled were rejected by an inspector.
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1. What was the standard labor cost per assembly under the old standard of 15 assemblies per hour?
2. What was the anticipated labor cost per assembly under the new standard of 20 assemblies per hour?
3. What was the actual labor cost per assembly during the week (after deducting the rejected units)?
4. Comment on the new labor standard and possible reasons for the losses.

Transcribed Image Text:

Employee Hours Worked Units Assembled 1234 38 660 38 590 38 630 38 620