The records of Norton, Inc. show the following for July: Standard labor-hours al

Question

The records of Norton, Inc. show the following for July: Standard labor-hours allowed per unit of output Standard variable overhead rate per standard direct labor-hour Good units produced Actual direct labor-hours worked Actual total direct labor Direct labor efficiency variance Actual variable overhead 2.3 38 60,000 139,000 $6,781,000 $ 48,000 U $5,091,000 Required Compute the direct labor and variable overhead price and efficiency variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Direct labor Price variance fficiency variance Variable overhead Price variance Efficiency variance

Explanation / Answer

Direct Labor :

Price Variance = $109,000 U

Efficiency Variance = $48,000 U

Variable Overhead:

Price Variance = $191,000 F

Efficiency Variance = $38,000 U

Explanation :

Direct labor:

Actual costs = $6,781,000

Actual inputs at standard price = $48× 139,000 = $6,672,000

Flexible budget (standard inputs allowed for good output) = $48 × 2.3 × 60,000 = $6,624,000

Price variance = $6,781,000 - $6,672,000 = $109,000 U

Efficiency variance = $6,672,000 - $6,624,000 = $48,000 U

Variable overhead:

Actual costs = $5,091,000

Actual inputs at standard price = $38 × 139,000 = $5,282,000

Flexible budget (standard inputs allowed for good output) = $38 × 2.3 × 60,000 = $5,244,000

Price variance = $5,091,000 - $5,282,000 = $191,000 F

Efficiency variance = $5,282,000 - $5,244,000 = $38,000 U

Standard labor wage rate

= [(Direct labor efficiency variance) ÷ Variable overhead efficiency variance)] × $38.

= [$48,000 ÷ $38,000] × $38 = $48

"It would be appreciated if you give your feedback"

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.