Question

Ceramics Etc. is a manufacturer of large flower pots for urban settings. The company has these​ standards:

REQUIREMENTS:

1.	Compute the direct labor rate variance and the direct labor efficiency variance.
2.	What is the total variance for direct​ labor?
3.	Who is generally responsible for each​ variance?
4.	Interpret the variances.

STARNDARD PRICE AND VOLUME

Direct materials (resin). . . . . . . . . . . . . . . . . . . . . . .	12 pounds per pot at a cost of $5.00
	per pound
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . .	3.0 hours at a cost of $19.00 per hour
Standard variable manufacturing
overhead rate. . . . . . . . . . . . . . . . . . . . . . . . .	$3.00 per direct labor hour
Budgeted fixed manufacturing overhead. . . . . . . . .	$36,400
Standard fixed MOH rate. . . . . . . . . . . . . . . . . . . . .	$8.00 per direct labor hour (DLH)

ACTUAL RESULTS:

Ceramics Etc. allocated fixed manufacturing overhead to production based on standard direct labor hours. Last​ month, the company reported the following actual results for the production of 1,600 flower​ pots:

Direct materials. . . . . . . . . . . . . . . . . . . . .	Purchased 19,920 pounds at a cost of
	$5.30 per pound; Used 19,520 pounds to
	produce 1,600 pots
Direct labor. . . . . . . . . . . . . . . . . . . . . . . .	Worked 3.5 hours per flower pot (5,600
	total DLH) at a cost of $18.00 per hour
Actual variable manufacturing overhead. . . . .	$3.20 per direct labor hour for total
	actual variable manufacturing overhead
	of $17,920
Actual fixed manufacturing overhead. . . . . . .	$35,800
Standard fixed manufacturing overhead
allocated based on actual production. . . . . . .	$38,400

Answer 1

Requirement 1. Labour Rate variance - (SR-AR) * Actual Hours used = ($191 heus – 18/heru) x 5600 bau) $5600 favourable Labair Efficiency Variance = (SH-AH) X SR. = (4800 -5600) x $19. = $ 15200 Unfavourable. . SHE $1600 x 3 Haus = 4800 hour. Requirement 2 Total Direct Labour Vaulance = $5600 (A) + $15200 (UP) & = $ 9600 unfavouable

Requirement-3
a.Human Resources or personnel
b. Production

Requirment-4
The Favourable labour rate variance means that Grand Ceramics Employees Earned less per Hour than Budgeted
The UNFavourable labour efficiency variance means that it actually took more direct labour Hour.