Saunders Tax Services prepares tax returns for senior citizens The standard in t

Question

Saunders Tax Services prepares tax returns for senior citizens The standard in terms of (direct labor) time spent on each return is 3hours. The direct labor standard wage rate at the turn is $12.00 per hour Last month. 2.990 direct labor hours were used to prepare 1.000 tax returns iota) wages totalled What is the actual (direct labor) wage rate per hour paid last month? What's the direct labor rate variance? What is the direct labor efficiency variance? How might the direct labor rate variance for the firm last month be causing the direct labor efficiency variance?

Explanation / Answer

Req 1: Actual Direct Labor Hour rate for the last month = 41860 / 2990 = $14 per DLH

Req 2: Direct Labor rate variance = (Standard Rate - Actual Rate) Actual hours worked

= (12 - 14 ) 2990 = $5980 UF

Req 3: Direct Labor Efficiency Variance = (Standard hours for actual work - Actual hours worked) * Standard Labour rate = (1000 * 3 - 2990) 12 = $120 F

Req 4: Due to the higher Actual Direct Labor rate, the labor is motivated to work faster and with accurary which leads to favourable Direct Labor Efficiency Variance.

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