Helix Company produce several products in its factory, including a karate robe.

Question

Helix Company produce several products in its factory, including a karate robe. The company uses a standard cost system to assist in the control of costs. According to the standards that have been set for the robes, the factory should work 780 direct labor-hours each month and produce 3,900 robes. The standard costs associated with this level cf production are as follows: During April, the factory worked only 755 direct labor-hours and produced 4,000 robes. The following actual costs were recorded during the month: At standard, each robe should require 2.6 yards of material. All of the materials purchased during the month were used in production Complete labor rate and efficiency variances far April: Compute the variable man. oh rate and efficiency variances:

Explanation / Answer

Labour rate variance = (standard rate p.hr. – actual rate p.hr.) * actual hrs worked = ($12870/780 - $14000/755) * 755hrs = $1542.50 (adverse) Labour efficiency variance = (standard hrs for actual output – actual hrs) * standard rate = [(780/$3900 * 4000) – 755] * $12870/780 = (800 – 755) * $16.50 = $742.50 (favourable) Variable mfg. Overhead rate = total overhead/total hrs = $3120/780 = $4 per man hr Variable mfg. OH Efficiency variance = (standard hrs for actual output – actual hrs) * standard rate = (800 – 755) * $3120/780 = $180 (favourable)

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