Exercise 11-14 The Pearl City Company uses a standard costing system. In August,

Question

Exercise 11-14 The Pearl City Company uses a standard costing system. In August, 5,900 actual labor hours were worked at a rate of $12.60 per hour. The standard number of hours is 5,720 and the standard wage rate is $12.80 per hour. Determine the Labor Rate and Variance Labor Efficiency Variance. (Enter all variances as a positive number.,) Labor Rate Variance Labor Efficiency Variance SHOW LIST OF ACCOUNTS LINK TO TEXT Record the related journal entry to record labor cost. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit To record labor cost)

Explanation / Answer

Answer:- Labor Rate variance = (Standard rate – Actual rate) * Actual hours

                                       = ($12.8 per hour - $12.6 per hour)*5900 hours   

                                       = $1180 Favourable

            Labor Efficiency variance = (Standard hours- Actual hours)*Standard rate per hour

                                       =(5720 hours – 5900 hours)*$12.80 per hour

                                       = $2304 Unfavourable

           Labor cost variance = Standard Cost – Actual cost

                                    =(5720 hours*$12.80 per hour)-(5900 hours*$12.60 per hour)

                                    = $73216-$74340

                                    = $1124 Unfavourable

Labor cost variance = Labor Rate variance+ Labor Efficiency variance

$1124 Unfavourable= $1180 Favourable+$2304 Unfavourable

Journal Entry to record labor cost Account title Debit Credit $ $ Inventory Finished goods 73216 Direct Labor Efficiency Variance 2304 Direct Labor Rate Variance 1180 Wages Payable 74340

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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