Chapter 10, Problem 49E

### Managerial Accounting: The Corners...

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

Chapter
Section

### Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
187 views

# Labor VariancesVerde Company produces wheels for bicycles. During the year, 660,000 wheels were produced. The actual labor used was 360,000 hours at $9.50 per hour. Verde has the following labor standard: 0.5 hour at$10.00.Required:Compute the labor rate variance.Compute the labor efficiency variance.

1.

To determine

Calculate the value of labor rate variance.

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 labor rate variance:

Labor Rate Variance=(Actual RateStandard Rate)×Actual Hours

Substitute $9.50 for actual rate,$10.00 for standard rate, 360,000 hours for actual hours in the above formula

2.

To determine

Calculate the value of labor efficiency variance.

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