[The following information applies to the questions displayed below.] Mom’s Appl

Question

[The following information applies to the questions displayed below.]

Mom’s Apple Pie Company uses a standard cost system. The standard direct labor time for each pie is 20 minutes. During the most recent month, the company produced and sold 5,100 pies. The standard direct labor rate is $9.6 per hour; the actual labor rate per hour for the month was $9.50. The company used a total of 1,800 labor-hours.

1. What was the direct labor efficiency (usage) variance for the month? (Do not round intermediate calculations.) Favorable or Unfavorable?

2. What was the direct labor rate (price) variance for the month? Favorable or Unfavorable?

Explanation / Answer

STANDARDS: A Standard labor hour per unit 0.33333333 (20/60) B Standard labor rate per hour $9.60 C=A*B standard Labor cost per unit $3.20 D Quantity produced and sold 5100 nos E=A*D Standard labor hour for 5100 units 1700 F=C*D Total standard labor cost for 5100nos $16,320 ACTUAL: G Actual labor hour 1800 H Actual labor rate per hour $9.50 I=G*H Actual Labor cost $17,100 1 Direct labor Efficiency variance=Standard Rate*(Standard total labor hour-Actual total labor hours) Direct labor Efficiency variance= $   (960) (9.6*(1700-1800)) Since actual hour is more than standard it is Unfavourable variance 2 Direct labor rate(price) variance=Actual labor hour*(Standard rate-Actual rate) Direct labor rate(price) variance= $180 (1800*(9.6-9.5) $      (780) Since actual rate is lower than standard rate, it is Favourable variance Labor cost variance(Total)=(Standard cost-Actual cost) Labor cost variance= ($780) (16320-17100) 180-960= $          (780)

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