Asked by Kamil Khanna on Apr 29, 2024
Verified
Motts Incorporated has a standard cost system in which the standard direct labor for a particular product is 0.50 hours at the standard rate of $21.00 per hour. The company has reported the following actual results for the product for October:
Required:a. Compute the labor rate variance for October.b. Compute the labor efficiency variance for October.
Labor Rate Variance
A measure used in managerial accounting to assess the difference between the actual wage rates paid to workers and the expected standard wage rates for a period.
Standard Direct Labor
The expected amount of labor time and cost necessary to produce one unit of product under normal conditions.
- Gauge the variations in labor rate and efficiency in labor performance.
- Scrutinize the consequences of good and poor variances to understand their importance.
Verified Answer
LT
Lewden TristanMay 02, 2024
Final Answer :
a. Labor rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)= $22,995 − (1,050 hours × $21.00 per hour)= $22,995 − $22,050= $945 Unfavorable
b. Standard hours = 2,300 units × 0.50 hours per unit = 1,150 hoursLabor efficiency variance = (Actual hours × Standard rate) − (Standard hours × Standard rate)= (Actual hours − Standard hours) × Standard rate= (1,050 hours − 1,150 hours) × $21.00 per hour= (−100 hours) × $21.00 per hour= $2,100 Favorable
b. Standard hours = 2,300 units × 0.50 hours per unit = 1,150 hoursLabor efficiency variance = (Actual hours × Standard rate) − (Standard hours × Standard rate)= (Actual hours − Standard hours) × Standard rate= (1,050 hours − 1,150 hours) × $21.00 per hour= (−100 hours) × $21.00 per hour= $2,100 Favorable
Learning Objectives
- Gauge the variations in labor rate and efficiency in labor performance.
- Scrutinize the consequences of good and poor variances to understand their importance.
Related questions
Glaab Incorporated Has Provided the Following Data Concerning One of ...
Bondi Corporation Makes Automotive Engines ...
Boldrin Incorporated Has a Standard Cost System ...
Kropf Incorporated Has Provided the Following Data Concerning One of ...
Mirabito Incorporated Has Provided the Following Data Concerning One of ...