P11-57B B work backward through labor variances (Learning Objective 3) Folklore
ID: 2520348 • Letter: P
Question
P11-57B
B work backward through labor variances (Learning Objective 3) Folklore Music manufactures harmonicas. Folklore uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and only partial data for July exist. Folklore knows that the total direct labor variance for the month was $350 F and that the standard labor rate was $11 per hour. A nt pay cut caused a favorable labor rate variance of $0.40 per hour. The standard direct labor hours for actual July outputs were 5,910. Requirements 1. Find the actual number of direct labor hours worked during July. First, find the actual direct labor rate per hour. Then, determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given. 2. Compute the direct labor rate and efficiency variances. Do th ese variances suggest that the manager may have made trade-offs? Explain.Explanation / Answer
1) actual direct labour rate = 11-0.40 = 10.60 per hour
Total standard cost = 5910*11 = 65010
Total direct labour cost variance = standard cost-actual cost
350 F = 65010-X
X(actual cost) = 64660
Actual hours = 64660/10.60 = 6100 hour
2) Direct labour rate variance = (11-10.60)*6100 = 2440 F
Direct labour efficiency variance = (5910-6100)*11 = 2090 U
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