5. Direct labor variances - Find the missing information: Case A 800 Case B 240

Question

5. Direct labor variances - Find the missing information: Case A 800 Case B 240 Case C 1,500 Units Produced Standard hours per unit Standard hours (SOA Standard rate per hour Actual hours worked Actual total labor cost Labor rate (price) vanance Labor efficien 480 $9.50 $7.00 2,330 S6.00 4,000 S26,812.50 $4,560 $288 U S466 F cy (usage) variance (c Letter Your answer LetterYour answer 6. Cartman makes Supersized Cheezy-Poofs. Cartman determined the standards for each unit (bag) of Cheezy-Poof produced requires 1.5 gallons of ingredients (direct materials) and 0.75 direct labor hours. Cartman expects to pay $2 per gallon of ingredients and his employees a rate of $10 per hour. Based on the company's forecasts, Cartman is expecting to sell 15,000 units (bags) during the year. At the end of year, Cartman actually sold 16,000 units (bags) and used 20,000 gallons of ingredients and paid S1.9 per gallon. Further, Human resources informed Cartman that he incurred $80,000 in direct labor costs from 10,000 direct labor hours (assume no overtime is used). a. What is the material price variance? b. What is the material quantity variance? c.What is the labor rate variance? d. What is the labor usage variance?

Explanation / Answer

Solution 5:

Missing details are as calculated below:

Case A Units produced 800 Standard hours per unit 3 Standard hours (SQA) a= 2,400 800*3 Standard rate per hour 7 Actual hours worked 2,330 Actual total labor cost b. 15,640 2,330*6.8 Labour rate (price variance) 466 F (AR-SR)*Actual hours (AR-7)*2,330 = -466 AR-7 = -466/2,330 AR= -0.2+7 AR= 6.8 Labour efficiency (usage variance) c= -490 (AH-SH)*SR (2,330-2,400)*7 Case B Units produced 240 Standard hours per unit d=7 480/240 Standard hours (SQA) 480 Standard rate per hour 9.5 Actual hours worked e= 450 Actual total labor cost 4,560 Labour rate (price variance) 288 U (AR-SR)*Actual hours (AR* Actual hours) - (SR *Actual hours) 4,560 - (9.5*Actual hours)= 288 4,560-288 = 9.5*Actual hours Actual hours 450 Labour efficiency (usage variance) f= -285 (AH-SH)*SR (450-480)*9.5 Case C Units produced 1,500 Standard hours per unit g= 2,42 3,625/1,500 Standard hours (SQA) h= 3,625 Standard rate per hour 6 Actual hours worked 4,000 Actual total labor cost 26,813 6.703125 Labour rate (price variance) i=2,800 (AR-SR)*Actual hours (6.7-6)*4,000 Labour efficiency (usage variance) 2,250 U (AH-SH)*SR (4,000-SH)*6 = 2,250 4,000-SH = 375 SH = 3,625

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