Abba Company produces sails for boats. The Houston plant uses a standard costing
ID: 2571734 • Letter: A
Question
Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor.
There are no beginning or ending inventories for direct materials.
For direct labor, what is the total budget variance?
Standards Cloth (Direct Materials) Standard Price $ 5 Direct Labor Standard Rate $ 12 December Data Number of Sails Produced 22,980 Cloth (Direct Materials) Actual Price $ 4 Actual Usage 102,469 square yards Standard Quantity Allowed (given production) 100,642 square yards Direct Labor Actual Rate $ 9 Actual Usage 21,497 hours Standard Quantity Allowed (given production) 17,434 hoursExplanation / Answer
standard total labour cost
standard rate
$ 12
standard quantity allowed
17,434
standard total labour cost
$ 2,09,208
actual total labour cost
actual rate
$ 9
actual quantity used
21,497
actual total labour cost
$ 1,93,473
Total budget labour variance = (standard total labour cost-actual total labour cost)
= $2,09,208-$1,93,473=$15,735 (F)
Total budget labour variance = $15,735 (favourable)
standard total labour cost
standard rate
$ 12
standard quantity allowed
17,434
standard total labour cost
$ 2,09,208
actual total labour cost
actual rate
$ 9
actual quantity used
21,497
actual total labour cost
$ 1,93,473
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