Elements of Labor and Variable Overhead Variances Chelsea Fabricating applies va

Question

Elements of Labor and Variable Overhead Variances Chelsea Fabricating applies variable overhead to products on the basis of standard direct labor hours. Presented is selected information for last month when 10,000 units were produced Required Solve for items "a" through "h." Direct labor Variable overhead a. 26,260 15,000 Actual b. $ b.$ 10,000 Standard hours/unit Actual hours (total) Standard rate/hour Actual rate Flexible budget Labor rate or variable overhead spending 6,300 $36.00 $37.80 $90,000 6,300 $24.00 $60,000 C. $ g. variance h. $ 800 U Efficiency variances Total flexible budget variance $3,000

Explanation / Answer

a.Actual direct labor cost = Total actual hours x actual rate = 6,300 x $ 37.80 = $ 238,140

b. Standard hours = Flexible Budget /standard rate per hour = $ 90,000/$ 36 = 2,500 hours

c.Labor rate variance = (standard rate – actual rate) x actual hours

                                                = ($ 36 - $ 37.80) x 6,300

                                                = - $ -1.8 x 6,300 = $ -11,340 Unfavorable

d.Efficiency variance = (standard hours – actual hours) x Standard rate

                                                = (2,500 – 6,300) x $ 36 = -3,800 x $ 36 = $ -136,800 Unfavorable

Answered : a –d.

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