Question

Frog Machinery, Inc is experimenting with a new labor mix for this month (March, 2015). The company's standard cost per unit information is as follows: Standard Quantity Standard Rate $20.00 per ounce $25.00 per hour $3.50 per hour Direct Materials 2.5 ounces Direct Labor 2 Hours Variable Mf.OH 2 Hours In March, the company employs 100 assembly workers to work on production of Machine Yellow Frog. They worked an average 190 hours per person at an average rate of $22 per hour. In the past (Feb and before), the 100 assembly worker labor mix consist of 50 senior workers and 50 junior workers. In this month, the company is experimenting with a new labor mix, changing it to fewer senior workers and more junior workers At the end of this month,9,000 machine Yellow Frog are produced What is labor spending variance and labor efficiency variance for Frog Machinery in March? Spending Variance Labor Efficiency Variance A. S 32,000 Favorable S 25,000 Favorable 25,000 Unfavorable 57,000 Unfavorable В. 32,000 Favorable С. 25,000 Unfavorable S D. S 32,000 Favorable 57,000 Unfavorable Е. 57,000 Favorable S 25,000 Favorable

Answer 1

Labor rate variance = (25-22)*19000 = 57000 Favorable

Labor efficiency variance = (9000*2-19000)*25 = 25000 Unfavorable

Labor spending variance = (9000*2*25)-(100*190*22) = 32000 F

So answer is b) $32000 Favorable ; $25000 Unfavorable