20. Caballero Corporation produces high-quality leather saddles. The company has

Question

20. Caballero Corporation produces high-quality leather saddles. The company has a standard cost system and has set the following standards for materials and labor:

Leather (20 strips @ $15) 300
Direct Labor (15 hours @ $15) 225
Total prime cost 525

During the year Caballero produced 150 saddles. Actual leather purchased was 3,100 strips, at $12 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 2,500 hours at $16 per hour.


Calculate the labor rate variance and the labor efficiency variance, respectively.
a. $2,250 U and $4,000 U


b. $2,500 U and $3,750 U


c. $2,250 F and $4,000 F


d. $2,500 F and $3,750 F
20. Caballero Corporation produces high-quality leather saddles. The company has a standard cost system and has set the following standards for materials and labor:

Leather (20 strips @ $15) 300
Direct Labor (15 hours @ $15) 225
Total prime cost 525

During the year Caballero produced 150 saddles. Actual leather purchased was 3,100 strips, at $12 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 2,500 hours at $16 per hour.
Calculate the labor rate variance and the labor efficiency variance, respectively. a. $2,250 U and $4,000 U
b. $2,500 U and $3,750 U
c. $2,250 F and $4,000 F
d. $2,500 F and $3,750 F a. $2,250 U and $4,000 U


b. $2,500 U and $3,750 U


c. $2,250 F and $4,000 F


d. $2,500 F and $3,750 F

Explanation / Answer

A LRV = (AR - SR)AH = ($16 - $15)2,500 = $2,500 U LEV


A MPV = (AH - SH)SR = (2,500 - 2,250)$15 = $3,750 U

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