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6 years ago
10) Superior Corporation reports the following standards for direct labor for the year:

Standard cost per hour   $17.75
Standard quantity per finished good   2.0 hours

During the year, 35,000 finished goods were produced. The direct labor efficiency variance was $2,650 favorable. The direct labor flexible budget variance was $550 favorable.

Calculate the following items regarding direct labor for Superior Corporation for the year:

A. Direct labor rate variance
B. Standard hours of direct labor for actual production
C. Actual hours of direct labor incurred for actual production
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#1
Staff Member
6 years ago
A.   Direct labor rate variance

DL Flex Budget Variance = Rate Variance + Efficiency Variance
550 favorable = Rate Variance + 2,650 favorable
So the rate variance must have been 2,650 -550 = $2,100 unfavorable
 
B.   Standard hours of direct labor for actual production

35,000 units were produced and the standard is 2 hours per unit
Standard hours for actual production = 35,000 x 2.0 = 70,000 hours

C.   Actual hours of direct labor incurred for actual production

Efficiency variance = (AH – SH) x SR favorable so AH < SH = -2,650
(AH – 70,000) x 17.75 = -2,650
AH – 70,000 = -2,650/17.75 = -149.3
AH = 70,000 – 149.3 = 69,850.7  (or 69,851)
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