Leeds Company uses the following rule to determine whether labor efficiency variances should be investigated: A labor efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labor cost. During September, the company used 500 direct labor hours at a rate of $15 per hour. Its standard rate is 475 direct labor hours at a rate of $14.50 per hour. A. Determine the company's labor efficiency variance and whether it is favorable or unfavorable. B. Should the variance be investigated?
Leeds Company uses the following rule to determine whether labor efficiency variances should be investigated: A labor efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labor cost. During September, the company used 500 direct labor hours at a rate of $15 per hour. Its standard rate is 475 direct labor hours at a rate of $14.50 per hour. A. Determine the company's labor efficiency variance and whether it is favorable or unfavorable. B. Should the variance be investigated?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 2BE: Direct labor variances Bellingham Company produces a product that requires 4 standard direct labor...
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Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Leeds Company uses the following rule to determine whether labor efficiency variances should be investigated:
A labor efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labor cost.
During September, the company used 500 direct labor hours at a rate of $15 per hour. Its standard rate is 475 direct labor hours at a rate of $14.50 per hour.
A labor efficiency variance will be investigated when the variance is greater than either $100 or 10% of the standard labor cost.
During September, the company used 500 direct labor hours at a rate of $15 per hour. Its standard rate is 475 direct labor hours at a rate of $14.50 per hour.
A. | Determine the company's labor efficiency variance and whether it is favorable or unfavorable. |
B. | Should the variance be investigated? |
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