Joe Malay received the following report on the Division\'s operation for the mon

Question

Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,400 unfavorable. Direct labor efficiency variance = $71,000 (?) The standard calls for 3.10 direct labor hours per unit of output at $28.20 per labor hour. The standard direct labor hours for the units manufactured is 20.00% more than the total direct labor hours actually worked in August. What were the total standard hours allowed for the units manufactured in August?   A) 17,106 B) 13,589 C) 16,106 D) 15,106 E) 12,589 Joe Malay received the following report on the Division's operation for the month of August: Direct labor rate variance = $25,400 unfavorable. Direct labor efficiency variance = $71,000 (?) The standard calls for 3.10 direct labor hours per unit of output at $28.20 per labor hour. The standard direct labor hours for the units manufactured is 20.00% more than the total direct labor hours actually worked in August. What were the total standard hours allowed for the units manufactured in August?   A) 17,106 B) 13,589 C) 16,106 D) 15,106 E) 12,589

Explanation / Answer

1. Labor efficiency variance in hours = $71,000/$28.20/hr. = 2,517.74 hours. 2. 2,517.74 hours = 20% of actual hours. 3. Actual hours = 2,517/.2 = 12,588.65 hours. 4. Therefore, Q s = 12,588.65 x 1.20 = 15,106 hours.

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