Question

The records of Norton, Inc. show the following for July. Standard labor-hours allowed per unit of output Standard variable overhead rate per standard direct labor-hour Good units produced Actual direct labor-hours worked Actual total direct labor Direct labor efficiency variance Actual variable overhead 1.7 $ 32 60,000 104,000 $2,367,000 $ 40,000 u $3,100,000 Required: Compute the direct labor and variable overhead price and efficiency variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Direct labor: Price variance Efficiency variance Variable overhead: Price variance Efficiency variance

Answer 1

Direct labor efficiency variance = (standard hours - Actual hours)*standard rate

-40000 = (60000*1.7-104000)*standard labor rate

Standard labor rate = $20 per hour

Direct labor price variance = (standard rate - actual rate)*actual hours

= (20-2367000/104000)*104000 = $287000 U

Direct labor efficiency variance = $40000 U

Variance overhead price variance = (32-3100000/104000)*104000

= $228000 F

Variable overhead efficiency variance = (60000*1.7-104000)*32

= $64000 U