Labor and Variable Manufacturing Overhead Variances [L05,L06] Hollowell Audio ma

Question

Labor and Variable Manufacturing Overhead Variances [L05,L06] Hollowell Audio manufactures military-specifications compact discs The company uses standards to control its costs the labor standards that have been set for one disc are as follows. During July, 9.360 hours of direct labor time were required to make 19,600 discs the direct labor cost totaled $54,288 for the month. According to the standards, what direct labor cost should have been incurred to make the 19,600 discs? (Do not round intermediate calculations.) By how much does this differ the cost that was incurred? (Input the amount as a positive value. Do not round intermediate calculations .Leave no cells blank - be certain to enter "0" whereever required .Indicate The effect of each variance by selecting "F" for favorable, "u" for unfavorable, and "None" for no effect Spending variance Break down the difference in cost from (1) above into a labor efficiency variances and a labor rate variance )Input all amounts as positive values. Do not round intermediate calculations Leave no cells blank -be certain to enter "0" wherever required .Indicate the effect of each variance by selecting "F" for favorable, " U" for unfavorable, and "None" for no effect Labor efficiency variances Labor rate variance

Explanation / Answer

1a) Total Standard Direct Labor Cost = 19600 * 2.7 =$52920

1b) Spending variance = $1368 (U)

2)

Labor Efficiency Variance = (SH-AH)SR= (8820-9360)*6 = $3240 (U)

Labor Rate Variance = (SR-AR)AH = (6-5.80) *9360 = $1872 (F)

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