Exercise 23-16 Computation and interpretation of labor variances LO P2 After eva
ID: 2525187 • Letter: E
Question
Exercise 23-16 Computation and interpretation of labor variances LO P2 After evaluating Null Company's manufacturing process, management decides to establish standards of 2 hours of direct labor per unit of product and $16.30 per hour for the labor rate. During October, the company uses 13,200 hours of direct labor at a $217,800 total cost to produce 6,900 units of product. In November, the company uses 23,300 hours of direct labor at a $386,780 total cost to produce 7,300 units of product. AH Actual Hours SH Standard Hours AR Actual Rate SR- Standard Rate AQ Actual Quantity SQ Standard Quantity AP Actual Price SP- Standard Price (1) Compute the direct labor rate varlance, the direct labor efficiency varlance, and the total direct labor cost varlance for each of these two months. Classify each varlance as favorable or unfavorableExplanation / Answer
October Actual Cost 2640 -9780 Standard Cost AH AR AH SR SH SR 13,200 $16.50 13,200 $16.30 13,800 $16.30 $217,800 $215,160 $224,940 2640 7140 9780 Direct labor rate variance 2640 Unfavorable Direct labor efficiency variance 9780 Favorable Total direct labor variance $7,140 Favorable November Actual Cost 6990 141810 Standard Cost AH AR AH SR SH SR 23,300 $16.60 23,300 $16.30 14,600 $16.30 $386,780 $379,790 $237,980 6990 148800 141810 Direct labor rate variance 6990 Unfavorable Direct labor efficiency variance 141810 Unfavorable Total direct labor variance $148,800 Unfavorable
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