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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information to complete Brief Exercises 10-25 and 10-26:

Tico Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.03 hour. During the month of April, 900,000 bottles were produced using 25,200 labor hours @ $15.00. The standard wage rate is $13.50 per hour.

10-25 Total Labor Variance

Refer to the information for Tico Inc. on the previous page.

Required:

Calculate the total variance for production labor for the month of April.

To determine

Compute the value of total variance for production labor for month of April.

Explanation

Variance:

The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.

Use the following formula to calculate total variance for the month of April:

Total Variance=Actual Cost1Budgeted Cost2

Substitute $378,000 for actual cost and $364,500 for budgeted cost in the above formula.

Total Variance=$378,000$364,500=$13,500

Therefore, total variance for the month of April is $13,500 U.

Working Note:

1

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