CengageNOWv2, 1 term Printed Access Card for Warren's Survey of Accounting, 8th
8th Edition
ISBN: 9781305961982
Author: Carl Warren
Publisher: Cengage Learning
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Question
Chapter 13, Problem 25CDQ
To determine
Concept Introduction:
Direct labor variances:
Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:
- Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows:
- Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows:
- Direct labor cost variance: this variance shows the difference of
standard cost and actual cost of labor. The formula to calculate this variance is as follows:
Or
Direct Labor cost variance = Actual Labor cost − Standard Labor Cost
To Indicate:
If the given remark is correct
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Check out a sample textbook solutionStudents have asked these similar questions
Quality Motor Company is an auto repair shop that uses standards to control its labor time and labor cost. The standard labor cost for a motor tune-up is given below:
Standard Hours
Standard Rate
Standard Cost
Motor tune-up
2.50
$ 33.00
$ 82.50
The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 58 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:
Labor rate variance
$ 80
F
Labor spending variance
$ 118
U
Required:
Determine the number of actual labor-hours spent on tune-ups during the week.
Determine the actual hourly pay rate for tune-ups last week
The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below:
Standard Hours
Standard Rate
Standard Cost
Motor tune-up
2.50
$31.00
$77.50
The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 56 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:
Labor rate variance
$
146
F
Labor spending variance
$
102
U
Required:
1. Determine the number of actual labor-hours spent on tune-ups during the week.
2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.)
Vincent Bassani has come to the accounting department for help in interpreting
his variance report. He says that he understands that last month was not a very good
one for output, but he really thought everyone put forth good effort, so he is confused
about the existence of an unfavorable labor efficiency variance. He cites as an example
of the workers' effort their willingness to work extra hours to get full output, even when
a whole week's worth of production had to be scrapped. He knew that his materials
costs would be higher, and that overtime would make his rate variance unfavorable,
but he certainly didn't think his workers had been inefficient.
Required:
Write a short note to Vincent explaining the probable cause of the unfavorable labor efficiency variance
Chapter 13 Solutions
CengageNOWv2, 1 term Printed Access Card for Warren's Survey of Accounting, 8th
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