P11-51A Work backward through labor variances ilearning Objective ) Petra\'s Mus
ID: 2524441 • Letter: P
Question
P11-51A Work backward through labor variances ilearning Objective ) Petra's Music manufacture5 harmonicas Petra uses standard costs to judge ?erformance Recently, a clerk mistakenly threw away some of the records, and only partial data fer February exist. Petra knows that the total direct abar variance for the mont was $330 F and that the standard labor rate was $10 per hour. A recent pay cut caused a favorable labor price variance of $0.50 per hour. The standard direct labor hours for actua February outputs were 5,600 Requirements 1. Find the actual number of direct labor hours worked curing February. Fist, find the actual direct labor rate her hour. Then, determine the actual number of direct labor hours worked by sotting up the computation of the total direct labor variance as given Compute the direct labor rate and efficiency variances. Do these variances suggest that the manager may have made trade-offs? Explain 2.Explanation / Answer
Solution:
Part 1 --- Actual Numbe rof direct labor hours worked
Standard Labor Rate = $10 per hour
It is given in the question that a recent pay cut cuased a favorable labor price variance of $0.50 per hour.
Favorable means where actual labor rate is lower than standard rate.
So, the Actual Labor Rate = $10 - $0.50 favorable = $9.50 per hour
Total Direct Labor Variance = Standard Direct Labor Cost - Actual Direct Labor Cost
or
Total Direct Labor Variance = (Standard Hours x Standard Rate) - (Actual Hours WOrked x Actual Rate )
$330 F = (5,600*$10) - (Actual Hours * $9.50)
$330 = 56,000 - Actual Hours * 9.50
Actual Hours * 9.50 = 55,670
Actual Hours = 55,670 / 9.5 = 5,860 Hours
The Actual Number of direct labor hours worked during February = 5,860 Hours
Part 2 --
Labor Rate Variance
Actual Hourly Rate (AHR)
$9.50
Per Hour
Standard Hourly Rate (SHR)
$10.00
Per Hour
Variance or Difference in Rate
$0.50
Per Hour
x Actual Labor Hours worked (21*150)
5860
Hours
Labor Rate Variance
$2,930
Favorable
Labor Quantity / Efficiency Variance
Total Standard Hours Allowed for actual production
5600
hours
Actual Labor Hours Worked
5860
hours
Variance or Difference in Hours
260
hours
x Standard Hourly Rate (SHR)
$10.00
per hour
Labor Efficiency Variance
$2,600
Unfavorable
The favorable direct labor rate variance combined with the unfavorable direct labor efficiency variance suggests that managers may have used less paid, less skilled workers who performed less efficiently. Net Effect is positive $330F, so this appear to have been a wise tradeoff.
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Labor Rate Variance
Actual Hourly Rate (AHR)
$9.50
Per Hour
Standard Hourly Rate (SHR)
$10.00
Per Hour
Variance or Difference in Rate
$0.50
Per Hour
x Actual Labor Hours worked (21*150)
5860
Hours
Labor Rate Variance
$2,930
Favorable
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