G & Associates is trying to establish the standard labor cost of a typical Fire
ID: 2806121 • Letter: G
Question
G & Associates is trying to establish the standard labor cost of a typical Fire District audit. The following data has been collected:
Actual labor time spent on the audit --- 200 hours
Hourly wage rate --- $30.00
Payroll taxes --- 10% of wage rate
Partner and Quality Control Review --- 10% of actual labor time
Fringe benefits --- 30% of wage rate
Instructions
(a)Determine the standard direct labor hours per audit
(b)Determine the standard direct labor hourly rate.
(c)Determine the standard direct labor cost per audit.
(d)If an audit actually takes 250 hours to complete, using standard hourly rate calculated in (b), what will the direct labor cost variance (hint compare to the standard direct labor cost for the audit)?
Explanation / Answer
Answer a Standard direct labor hours per audit = Actual labour time spent + Partner and Quality Control Review time = 200 hours * (10% of 200 hours) = 220 hours Answer b Standard Direct Labour hourly rate = Hourly wage rate + Payroll taxes + Fringe benefits = $30 + [10% of $30] + [30% of $30] = $42 per hour Answer c Standard direct labor cost per audit = Standard direct labor hours per audit * Standard Direct Labour hourly rate = 220 hours * $42 = $9240 Answer d Direct Labour cost variance = Actual labour hours at standard hourly rate - Standard labour hours at Standard hourly rate Direct Labour cost variance = [250 hours * $42] - [220 hours * $42] = $10500 - $9240 = $1260 U
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