Lemke Music manufactures harmonicas. Lemke uses standard costs to judge perfoman

Question

Lemke Music manufactures harmonicas. Lemke uses standard costs to judge perfomance. Recently, a clerk mistakenly threw away some of the records, and only partial data for June exist. Lemke knows that the total direct labor variance for the month was $350 F and that the standard labor rate was $11 per hour. A recent pay cut caused variance of $0.40 per hour. The standard direct labor hours for actual June outputs were 5,910 a favorable labor rate Read the requirements Requirement 1. ? d the actual number o direct labor hours worked during June First find the actual rect labor pnce rate per hour. Then determine actual number of direct labor hours worked by setting up the computation of the tota direct labor va ance as g en Sclect the formula, then cakculate the actual price per haur Requirements Actual direct labor rate por hour 1. Find the actual number of direct labor hours worked during June First, find tha actual cirect 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 labar rate and efficiency variances Do these variances suggest that the manager may have made trade-offisxn Print Done

Explanation / Answer

Solution 1:

Standard labor rate per hour = $11

Favorable direct labor rate variance = $0.40 per hour

Actual labor rate per hour = $11 - $0.40 = $10.60

Standard direct labor hour for actual output = 5910

Standard direct labor cost = 5910 * $11 = $65,010

Total direct labor cost variance = $350 F

Standard direct labor Cost - Actual direct labor cost = $350

Actual direct labor cost = $65,010 - $350 = $64,660

Actual number of direct labor hours worked = Actual direct labor cost / Actual direct labor rate

= $64,660 / $10.60 = 6100 hours

Solution 2:

Direct labor rate variance = (SR - AR) * AH = ($11 - $10.60) * 6100 = $2,440 F

Direct labor efficiency variance = (SH - AH) * SR = (5910 - 6100)* $11 = $2,090 U

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