Question

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Austin Music manufactures harmonicas. Austin uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and only partial data for February exist. Austin knows that the total direct labor variance for the month was $370 F and that the standard labor rate was $8 per hour. A recent pay cut caused a favorable labor rate variance of $0.30 per hour. The standard direct labor hours for actual February outputs were 5,340. Read the requirements. Requirement 1. Find the actual number of direct labor hours worked during February. First, find the actual direct labor price rate per hour. Then, determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given. Select the formula, then calculate the actual price per hour. Standard direct labor rate per hour 1-1 = Actual direct labor rate per hour Favorable labor rate variance 0 .30 1 7.7 Determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given. (Enter the known amounts, then determine the missing amounts to solve for the actual direct labor hours. Enter the amounts as positive numbers. Label the variance as favorable (F) or unfavorable (U).) Austin Music Schedule to Compute Actual Direct Labor Hours Flexible budget for actual output Flexible budget variance Actual Direct labor hours Cost per hour Total direct labor cost Flexible budget variance

Answer 1

Please find below table to compute desired results: -

370 Favaorable 1 Total Labor rate variance 2 Standard labor rate 0.3 Favorable labor rate variance 3 5340 |=B2-B3 4 Actual Output 5 Actual direct Labor Rate per hour Austin Music 7 Schedule to compute Actual Direct Labor Hours Flexible budget Actual |=B11/B10 =B5 =C11-D12 Flexible budget for actual output =B4 |=B2 |=C9*C10 variance 9 Direct Labor Hours 10 Cost per hour 11 Total Direct labor cost =B1 =C1 Flexible Budget variance 12 13 =B9*(B10-C10) F |=C10*(B9-C9) U 14 Direct Labor rate variance 15 Direct Labor efficiency variance ш

End results would be as follows: -

370.00 | Favaorable Total Labor rate variance 8.00 Standard labor rate 2 Favorable labor rate variance 0.30 3 Actual Output Actual direct Labor Rate per hour 5,340.00 4 7.70 Austin Music Schedule to compute Actual Direct Labor Hours Flexible budget for actual output 5,340.00 Flexible budget Actual variance 9 Direct Labor Hours 5,500.00 Cost per hour 7.70 8.00 10 42,720.00 Total Direct labor cost 42,350.00 11 370.00 Favaorable Flexible Budget variance 12 13 (1,650.00) F 1,280.00 U Direct Labor rate variance 14 15 Direct Labor efficiency variance

The favorable direct labor rate variance combined with the unfavorable direct labor efficiency variance suggests that the manager may have used lower paid, less efficient workers. However, due to the overall net effect, it appears there was a reasonable trade-off.