Question

The records of Norton, Inc. show the following for July:

Standard labor-hours allowed per unit of output		1.8
Standard variable overhead rate per standard direct labor-hour	$	33
Good units produced		60,000
Actual direct labor-hours worked		109,000
Actual total direct labor	$	4,791,000
Direct labor efficiency variance	$	43,000	U
Actual variable overhead	$	3,401,000

Required:

Compute the direct labor and variable overhead price and efficiency variances.

Answer 1

Standard Hours allowed for actual production =60000 units * 1.8 hours per unit
	=108000 hours
Direct Labor Efficiency Variance = Standard Rate Per Hour * (Standard Hours For Actual Production - Actual Hours)
$43000 (U) = Standard Rate Pe Hour * (108000 hours -109000)
Standard Rate Per hour =$43
Actual Rate per hour = $4791000/109000
Direct Labor Price Variance = Actual Hours * (Standard Rate per Hour - Actual Rate Per Hour)
	= (Actual Hours * standard rate ) - (actual labor cost)
	=(109000 hours *$43) - ($4791000)
	=$104000 (U)
Direct Labor Efficiency Variance = $43000(U) …........ Given in the question
Variable Overhead Price Variance = Actual Hours * (Standard Rate per Hour - Actual Rate Per Hour)
= (actual hours * standard rate ) - ( actual variable overhead cost)
=(109000 hours *$33 ) - ($3401000)
=$196000 (F)
VAriable Labor Overhead Variance = Standard Rate Per Hour * (Standard Hours For Actual Production - Actual Hours)
= $33*(108000 hours -109000)
=$33000 (U)