Accelerator, Inc. manufactures a fuel additive called surge. The company produce

Question

 Accelerator, Inc. manufactures a fuel additive called surge. The company produces and sells 87,000 containers of surge each month. The company has established the following standards for each container of surge produced:                      standard quantity              standard price direct materials        7 gallons                  $4.00 per gallon direct labor            2.50 hours                 $14.00 per hour  The following information is available for surge for the month of May:  1.  650,000 gallons of chemicals were purchased at a cost of $2,522,000.     At May 31, Accelerator, Inc. had 30,000 gallons of chemical available     in the storeroom.  2.  215,000 direct labor hours were worked during May at a total cost of     $3,096,000.  Calculate the total direct labor variance for May. If the variance is unfavorable, enter a U after your number with a space between the number and the U (i.e., 10,000 U). If the variance is favorable, enter an F after your number with a space between the number and the F (i.e., 10,000 F).  Do not use decimals or a minus sign in your answer. 

Explanation / Answer

Actual production 87000 containers Std labour hour required per unit produced    2.50 hour per unit Std labour rate per hour $ 14 per hour Std labour hours required for actual production ( 87000*2.50)= 217,500 labour hours Std labour cost for actual output (217500 hours @14) = $ 3045,000 Actual labour cost = $ 3096,000 Total Labour cost variance = Std labour cost for actual production - Actual labour cost                                                        3045,000 -3096,000 = $ 51,000 U

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