Question

Antuan Company set the following standard costs for one unit of its product. Direct materials (4. Ibs. @ $4.00 per Ib.) Direct labor (1.8 hrs. @ $12.88 per hr.) Overhead (1.8 hrs. @ $18.50 per hr.) Total standard cost $16.00 21.60 33.30 $70.90 The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) Variable overhead costs Indirect materials $ 15,888 Indirect labor ,000 Power 15,680 Repairs and maintenance 30,839 Total variable overhead costs Fixed overhead costs Depreciation-Building 24,690 Depreciation Machinery 71,680 Taxes and insurance 18,000 Supervision 236,500 Total fixed overhead costs Total overhead costs $150,000 349,500 $499,500 The company incurred the following actual costs when it operated at 75% of capacity in October. $ 256, 289 282,988 Direct materials (61,989 Ibs. @ $4.20 per lb.) Direct labor (23,000 hrs. @ $12.38 per hr.) Overhead costs Indirect materials Indirect labor Power Repairs and maintenance Depreciation-Building Depreciation-Machinery Taxes and insurance Supervision Total costs $ 41,850 176,750 17,250 34,500 24,000 95,850 16,200 236,500 642,900 $1,182,082 4. Compute the direct labor cost variance, including its rate and efficiency variances. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate Actual Cost AH X 23,000 X Standard Cost X AH X SR SH SR AR $ 12.30 282,900 $ 0 01

Answer 1

Answer- 4)- Total direct labor cost variance =$41100 Favorable.

Direct Labor rate variance = $6900 Unfavorable.

Direct Labor Efficiency variance= $48000 Favorable.

Explanation- Total direct labor cost variance = Standard cost- Actual cost

= (27000 hours*$12 per hour)- $282900

= $324000-$282900

= $41100 Favorable

Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

                                       = ($12.00 per hour – $12.30 per hour)* 23000 hours   

                                       = $6900 Unfavorable

Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour

                                       =(27000 hours – 23000 hours)*$12.00 per hour

                                          = $48000 Favorable

Where:-

Standard Hours = No. of hours per unit*Actual output

= 1.8 hours per unit *(20000 units*75%)

=27000 hours