Custom Clubs produces handmade golf clubs. The process is labor intensive. The s
ID: 2465576 • Letter: C
Question
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. Complete the spreadsheet and 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
Labor variances: Actual Labor Cost Actual hours of labor 4,900 Actual rate = 63700 / 4900 $ 13 Actual cost of direct labor $ 63,700 Standard Labor Cost Output - number of clubs 2,500 Standard hours per club 2 Standard hours to achieve output 5,000 Standard rate per hour $ 12 Standard cost of direct labor $ 60,000 Total labor variance (standard cost v. actual cost) $ (3,700) Labor rate variance: Standard rate 12 Actual rate 13 (1) Actual hours 4,900 Unfavorable labor rate variance $ (4,900) Labor efficiency variance: Standard hours 5000 Actual hours 4900 100 Standard rate 12 Favorable labor efficiency variance $ 1,200
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