Exercise 8-10 Labor and Variable Manufacturing Overhead Variances [LO5, LO6] Hol

Question

Exercise 8-10 Labor and Variable Manufacturing Overhead Variances [LO5, LO6]

Hollowell Audio, Inc., manufactures military-specification 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, 10,440 hours of direct labor time were required to make 19,800 discs. The direct labor cost totaled $64,728 for the month.

According to the standards, what direct labor cost should have been incurred to make the 19,800 discs? (Do not round intermediate calculations.)

By how much does this differ from 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" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Break down the difference in cost from (1) above into a labor efficiency variance 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 (i.e., zero variance).)

The budgeted variable manufacturing overhead rate is $4.30 per direct labor-hour. During July, the company incurred $54,288 in variable manufacturing overhead cost. Compute the variable overhead efficiency and rate variances for the month. (Input all amounts as positive values. Do not round intermediate calculations. Round your final answers to the nearest dollar amount. 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 (i.e., zero variance).)

Hollowell Audio, Inc., manufactures military-specification compact discs. The company uses standards to control its costs. The labor standards that have been set for one disc are as follows:

Explanation / Answer

Hollowell Audio, Inc., manufactures military-specification 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, 10,440 hours of direct labor time were required to make 19,800 discs. The direct labor cost totaled $64,728 for the month.

1a - 19800 x 3.2 = 63360 Stnd Labor cost

1b - Actual 64,728 vs 63360 = 1368 Unfav

2 -
Rate Variance - 64,728/ 10,440 = 6.2 vs 6.4

Stnd = .2 Fav x 10,440= 5022Fav

Hollowell Audio, Inc., manufactures military-specification compact discs. The company uses standards to control its costs. The labor standards that have been set for one disc are as follows:

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