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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307

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BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307
Textbook Problem

Direct labor variances

Greeson Clothes Company produced 25,000 units during June of the current year. The Cutting Department used 6,580 direct labor hours at an actual rate of $10.90 per hour. The Sewing Department used 9,875 direct labor hours at an actual rate of $11.12 per hour. Assume there were no work in process inventories in either department at the beginning or end of the month. The standard labor rate is $11.00. The standard labor time for the Cutting and Sewing departments is 0.25 hour and 0.4 hour per unit, respectively.

  1. A. Determine the direct labor rate, direct labor time, and total direct labor cost variance for the (1) Cutting Department and (2) Sewing Department.
  2. B. Interpret your results.

To determine

(a) (1)

Direct labor variances:

The difference between the actual labor cost in the production and the standard labor cost for actual production is known as direct labor cost variance. The direct labor variance can be classified as follows:

  • Labor rate variance.
  • Labor time variance.

Cutting department:

To determine: The direct labor rate variance for the cutting department.

Explanation

The direct labor rate variance is determined as follows:

Direct labor rate variance = [(Actual rate per hourStandard rate per hour)× Actual hours]=[($10

(b)

To determine

To interpret: The results of (a).

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