Hollowell Audio, Inc., manufactures military-specification compact discs. The co

Question

Hollowell Audio, Inc., manufactures military-specification compact discs. The company uses standards to control its costs. The labor standards that have been set for one disc are as follows: During July, 10,160 hours of direct labor time were required to make 19,300 discs. The direct labor cost totaled $60,960 for the month. Required: According to the standards, what direct labor cost should have been incurred to make the 19,300 discs? By how much does this differ from the cost that was incurred? (Do not round intermediate calculations.) Break down the difference in cost from (1) above into a labor rate variance and a labor efficiency variance (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Explanation / Answer

           1 Details Amt $/Rate No of Units Manufactured                    19,300 Std Labor time per unit                         0.50 Total Std Labor time allowed                 9,650.00 Std Direct Labor rate /hr                         6.20 Total Std Direct Labor cost              59,830.00 Actual Direct Labor cost              60,960.00 Spending Variance -Unfavorable=                 1,130.00 Actual direct labor hrs used              10,160.00 Actual direct labor rate/hr=                         6.00            2 Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =10160*(6-6.20)                       2,032 (F) Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output)   =6.20*(10160-9650)                       3,162 (U)

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