As detailed as possible please Indianapolis Insurance Company compares actual re
ID: 2793582 • Letter: A
Question
As detailed as possible please
Indianapolis Insurance Company compares actual results with a flexible budget at periodic intervals. The standard direct labor rates used in the flexible budget are established each year at the time the ted and held constant for the The standard direct labor rates in effect for the current fiscal year and the standard hours allowed for schedule below. INDIANAPOLIS INSURANCE COMPANY STANDARD DIRECT LABOR RATES FOR VARIOUS LABOR CLASSES FOR CURRENT FISCAL YEAR Standard Direct Standard Direct Labor Labor Rate Per HourHours Allowed For Output Labor Class III Labor Class II Labor Class I 10.00 8.50 7.00 750 1,250 are as followsExplanation / Answer
I've written Formulae on top and then done calculations for each class based on the Formula
Direct Labour rate variance = (Standard Labour rate - Actual Labour rate) * Actual Labour hours
For Class III:
Direct Labour rate variance = ($10-$10.25)* 450 = -$112.5
For Class II:
Direct Labour rate variance = ($8.5-$8.3)* 725 = $145
For Class I:
Direct Labour rate variance = ($7-$7.1) * 1425 = -$142.5
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Direct Labour quantity Variance = (Standard Labour Hours - Actual Labour Hours) * Standard Direct Labour rate
For Class III:
Direct Labour quantity Variance = (500 - 450) * $10 = $500
For Class II:
Direct Labour quantity Variance = (750-725) * $8.5 = $212.5
For Class I:
Direct Labour quantity Variance = (1250- 1425) * $7 = -$1225
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Labour Mix Variance = [(Standard hours worked of Class * Total Actual hours worked / Total Standard hours) - Actual Hours worked of Class] * Standard rate of Class
Total Actual Hours worked = 450 + 725 + 1425 = 2600
Total Standard Hours = 500 + 750 + 1250 = 2500
For Class III:
Labour Mix Variance = [(500 * 2600/2500) - 450] * $10 = $700
For Class II:
Labour Mix Variance = [(750*2600/2500)- 725] * $8.5 = $467.5
For Class I:
Labour Mix Variance = [(1250*2600/2500) - 1425] * $7 = -$875
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Labour yield variance = [Actual Yield - Standard yield from actual hours worked] * Standard Rate
= [(Actual Hours * Actual Rate) - ( Actual hours * Standard rate)] * Standard Rate
For Class III:
Labour yield variance = [( 450 * $10.25) - (450 - $10)] * $10 = $1125
For Class II:
Labour yield variance = [( 725 * $8.3) - (725 - $8.5)] * $8.5 = -$1232.5
For Class I:
Labour yield variance = [( 1425 * $7.1) - (1425 - $7)] * 7 = $997.5
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