Question

1. Lee Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information.

Direct labor (10,000 hours at $15 per hour) $150,000
Variable overhead                                          $30,000
Fixed overhead                                                $80,000

During May, 6,000 units were produced and the direct labor efficiency variance was $1,500 unfavorable. Based on this information, the actual number of direct labor hours used in May was:

a. 9,900 hours b. 11,900 hours c. 10,100 hours d. 12,100 hours

2. A company had a total labor variance of $15,000 favorable and a labor efficiency variance of $18,000 unfavorable. The labor price variance was:

a. $3,000 U b. $33,000 U c. $33,000 F d. $3,000 F

3. Lee manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of June included 10,000 hours of direct labor at $15 per hour, $150,000. During June, 4,500 units were produced, using 9,600 direct labor hours, incurring $39,360 of variable overhead, and showing a variable overhead efficiency variance of $2,400 unfavorable. The standard variable overhead rate per direct labor hour was:

a. $6.00 b. $4.10 c. $3.85 d. $4.00

Answer 1

1) Labor efficiency variance = (Standard hour-actual hour)Standard rate

-1500 = (10000*15-X15)

15X = 151500

x(actual hour) = 10100 Hour

So answer is c) 10100 Hour

2) Labor rate variance = Total labor variance+Labor efficiency variance = 15000 F+18000 U = 33000 F

So answer is c) $33000 F

3) Variable overhead efficiency variance = (Standard hour-actual hour)Standard rate

-2400 = (9000X-9600X)

-2400 = -600X

X(Standard variable overhead rate per hour) = 4

So answer is d) $4.00

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