4. Standard cost system labor variance The following computations of March labor

Question

4. Standard cost system labor variance

The following computations of March labor variances for Sam’s Supply Company are incomplete. The missing items are labeled (a) through (d).

Labor rate variance = 4,800 hours [(a) – $8.50] = $350 favorable

Labor efficiency variance = (b) [(c) – 5,000 hours] = $(d)

On the appropriately labeled line, identify each missing item by name (a through c) and show the missing value (a through d). Show supporting computations in the space provided.

(a) _________________________ $_______________

(b) _________________________ $_______________

(c) _________________________ ____________________ hours

(d) $______________ F or U [Choose the correct term.]

(e) During March, the supervisor left for vacation without arranging for a replacement. Which variances would have been most affected by this situation? _________________________ Computations:

Explanation / Answer

[a] Actual rate = 8.5-350/4800 = $         8.43 Alternatively: Rate variance = Actual hours*(Actual rate-Standard rate) = -350 Substituting figures we have -350 = 4800*(AR-8.5); -350 = 4800AR - 40800; 40450=4800AR AR = 40450/4800 = $8.43 [b] Standard rate $         8.50 [c] Actual hours 4800 hours [d] Labor efficiency variance = 8.5*(4800-5000) = 1700 [F] [e] Labor efficiency variance. The assumptio is that the supervisor left on paid vacation.

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