Hunter Family Instruments makes cellos. In 2011, the company made 6,550 cellos e

Question

Hunter Family Instruments makes cellos. In 2011, the company made 6,550 cellos even though the budget planned for only 5,840. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During 2011, a total of 24,976 direct labor hours were worked. Calculate the direct labor rate and efficiency variances. (Enter all amounts as positive values.) Direct labor rate variance $ Direct labor efficiency variance $

Explanation / Answer

Direct Labor rate Variance = (SR-AR)*AH = (14-15)*24976 = 24976 (A)

Direct Labor efficiency Variance = (SH-AH)*SR = (26200-24976)*14 =17136 (F)

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