Labor variances: Custom Clubs produces handmade golf clubs. The process is labor
ID: 2465490 • Letter: L
Question
Labor variances:
Custom Clubs produces handmade golf clubs. The process is labor intensive. The speed at which a club can be built depends on the skill level of the individual worker. Management has established a standard of 2 labor hours per club. The standard wage rate is $12 per hour. During a recent month, 2,500 custom clubs were produced. Management was pleased that only 4,900 labor hours were worked; however, total wages amounted to $63,700.Compute the total variance for labor, and determine how much is related to rate and efficiency components.
Labor variances:
Actual Labor Cost Actual hours of labor - Actual rate $ - Actual cost of direct labor $ - Standard Labor Cost Output - number of clubs - Standard hours per club $ - Standard hours to achieve output - Standard rate per hour $ - Standard cost of direct labor $ - Total labor variance (standard cost v. actual cost) $ - Labor rate variance: Standard rate $ - Actual rate - $ - Actual hours - Unfavorable labor rate variance $ - Labor efficiency variance: Standard hours - Actual hours - - Standard rate $ - Favorable labor efficiency variance $ -Explanation / Answer
std hours = 2500*2 = 5000
total labor vriance = actual cost - std cost
= 63700 - 5000*12 = 3700 U
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