Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 22, Problem 22.13EX
Direct labor variances for a service company
Hit-n-Run Food Trucks, Inc. owns and operates food trucks (mobile kitchens) throughout the west coast. The company's employees have varying wage levels depending on their experience and length of time with the company. Employees work 8-hour shifts and are assigned to a truck each day based on labor needs to support the daily menu. One of its trucks, Jose O’Brien's Mobile Fiesta, specializes in Irish-Mexican fusion cuisine. The truck offers a single menu item that changes daily. On November 11, the truck prepared 200 of its most popular item, the Irish breakfast Enchilada, the following data are available for that day:
| Quantity of direct labor used | |
| (3 employees, working 8-hour shifts) | 24 hrs. |
| Actual rate for direct labor | $15.00 per hr. |
| Standard direct labor per meal | 0.1 hr. |
| Standard rate for direct labor | $15.50 per hr. |
- A. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance.
- B. Discuss what might have caused these variances.
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Variable Overhead Variances
Logistics Solutions provides order fulfillment services for dot.com merchants. The company mainains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours.
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Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:
During August. 5,750 hours of direct labor time were needed to make 20,000 units of the Jogging Mate. The direct labor cost totaled $102,350 for the month.
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Chapter 22 Solutions
Financial & Managerial Accounting
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY