exercise 8-11 Working Backwards from Labor Variances [LO5] The Worldwide Credit
ID: 2369662 • Letter: E
Question
exercise 8-11 Working Backwards from Labor Variances [LO5]
The Worldwide Credit Card, Inc., uses standards to control the labor time involved in opening mail from card holders and recording the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opening and recording each batch. The labor standards relating to one batch are as follows:
per batch:
Standard hours: $2
Standard rate: $6
Standard Cost: $12.80
The record showing the time spent last week in opening batches of mail has been misplaced. However, the batch supervisor recalls that 210 batches were received and opened during the week, and the controller recalls the following variance data relating to these batches:
total labor spending variance: $144
labor rate variance: $848
1.Determine the number of actual labor-hours spent opening batches during the week..
Determine the actual hourly rate paid to employees for opening batches last week. (Round your answer to 2 decimal places.)
The Worldwide Credit Card, Inc., uses standards to control the labor time involved in opening mail from card holders and recording the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opening and recording each batch. The labor standards relating to one batch are as follows:
per batch:
Standard hours: $2
Standard rate: $6
Standard Cost: $12.80
The record showing the time spent last week in opening batches of mail has been misplaced. However, the batch supervisor recalls that 210 batches were received and opened during the week, and the controller recalls the following variance data relating to these batches:
total labor spending variance: $144
labor rate variance: $848
1.Determine the number of actual labor-hours spent opening batches during the week..
Explanation / Answer
Assuming both variance are favourable
and Standard cost per unit is wrong calculated correct standard cost per unit= 2*6 =$12
so below calcultion is based on above assumption
1.Determine the number of actual labor-hours spent opening batches during the week..
total labor spending variance: $144
=> (SH-AH)*6 = $144
210*2-AH= 24Hour
AH = 420-24 = 396 Hour
Number of actual labor-hours = 396 hour
2.Determine the actual hourly rate paid to employees for opening batches last week.(Round your answer to 2 decimal places.)
labor rate variance: $848
labor rate variance = (SR-AR)*AH
(6-AR)*396 = 848
AR = $3.86
the actual hourly rate paid to employees for opening batches last week =$3.86
Assuming both variance are favourable
and Standard cost per unit is wrong calculated correct standard cost per unit= 2*6 =$12
so below calcultion is based on above assumption
1.Determine the number of actual labor-hours spent opening batches during the week..
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