When more hours of abor time are necessaryto complete a job than the tandard all

Question

When more hours of abor time are necessaryto complete a job than the tandard allows, the labor ratevariance is O True O False QUESTION 2 Zanny Electronics Company uses a standard cost system to collect costs related to the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for the month of August? O$972 favorable $1,188 unfavorable $2.160 favorable $2,808 unfavorable QUESTION 3 Which of the following statements is(are) true? 1) The material quantity variance is based on actual output. 2) The material quantity variance is based on standard output. 3) The material price variance is preferably based on the actual quantity used 4) The material price variance is preferably based on the actual quantity purchased. 2 and 4, and 3

Explanation / Answer

QUESTION 1:

When more hours of labour time are necessary to complete the job than the standard allowance , then the labour rate variance is UNFAVOURABLE:--TRUE.

The reason being when workers take an amount of time that is more than than the amount of time allowed by standards, thereby increasing the labour cost then the variance is known as unfavourable direct labour efficiency variance. The formula for which is as follows: (Actual hours worked-Standard hours allowed) *standard rate.

QUESTION 2:

Direct labour rate variance is the measure of difference between the actual cost of direct labour and the standard cost of direct labour utilized during a period.

Formula for labour rate variance= (Actual Rate- Standard Rate)*Actual Hours

                                                         =Actual Rate*Actual Hours- Standard Rate*Actual Hours

                                                        =Actual Cost-Standard Rate*Actual hours

                                                         =$ 48708-$7.20/hour*6600 hours

                                                        =1188( unfavourable)

Therefore 2nd option is correct i.e 1188 (unfavourable)

QUESTION 3:

1)Material quantity variance is based on actual output: FALSE

2) Material quantity variance is based on standard output: TRUE

This is true because material quantity variance is the difference between the actual amount of material used in the production process( or to manufacture a standard output) and the amount that was expected to be used. This measurement is employed to determine the efficiency of a production process in converting raw materials into finished goods.

3)Material Price Variance is preferably based on Actual Quantity used: FALSE

4) Material Price Variance is preferably based on Actual Quantity Purchased: TRUE

This is true because Material Price Variance is the difference between the standard cost and the actual cost for the actual quantity of materials purchased

Hence the FIRST option is correct i.e 2nd and 4th are TRUE

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