company Affordable Electronics Inc manufactures medium-quality, reasonably price
ID: 2512082 • Letter: C
Question
company Affordable Electronics Inc manufactures medium-quality, reasonably priced DVD players. The comp es medium-quality, reasonably priced DVD players. uses standards to control its costs. The labour standards that have been set for one player are as follows Standard Cost Standard Rate Standard Hours per Hour 8 minutes (0.30 hours) $14.00 $4.20 During July 7750 hours of direct labour time were recorded to make 25,000 units. The direct labour cost totalled $110,825 for the month. Required 1-a. What direct labour cost should have been incurred to make the 25,000 DVD players? (Do not round intermediate calculations.) Direct labour cost 1.b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable. "U". for unfavourable, and "None" for no effect (i.e., zero variance).) otal variance 2. Break down the difference in cost from requirement 1-b above into a labour rate variance and a labour efficiency variance (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable. and None for no effect (i.e., zero variance).)Explanation / Answer
SOLUTION
1A.
1B. Total Variance = Standard direct labour cost - Actual direct labour cost
= $105,000 - $110,825 = $5,825 (U)
2. Labor rate variance = Actual hours * (Actual rate - Standard rate)
= (Actual hours * Actual rate) - (Actual hours * Standard rate)
= $110,825 - (7,750 * $14)
= $110,825 - $108,500 = $2,325 (U)
Labor efficiency variance = Standard rate * (Actual hours - Standard hours)
= $14 * (7,750 - 7,500)
= $14 * $250 = $3,500 (U)
Total variance = $2,325 (U) + $3,500 (U) = $5,825 (U)
Standard hours = 25,000 * 0.3 = 7,500
Amount ($) Number of units manufactured (A) 25,000 Standard labour time per unit (B) 0.3 Total standard hours of labour time allowed (C= A*B) 7,500 Standard direct labour rate per hour (D) 14 Total standard direct labour cost (C*D) 105,000Related Questions
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