Tharaldson Corporation makes a product with the following standard costs:

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		5.5	ounces	$	2.00	per ounce	$	11.00
Direct labor		0.4	hours	$	11.00	per hour	$	4.40
Variable overhead		0.4	hours	$	8.00	per hour	$	3.20

The company reported the following results concerning this product in June.

 

Originally budgeted output		4,100	units
Actual output		4,100	units
Raw materials used in production		20,500	ounces
Purchases of raw materials		21,600	ounces
Actual direct labor-hours		550	hours
Actual cost of raw materials purchases	$	42,800
Actual direct labor cost	$	14,100
Actual variable overhead cost	$	4,050

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor rate variance for June is:

Garrison 16e Rechecks 2017-10-31

Multiple Choice

• $8,050 F
• $1,523 U
• $1,523 F
• $8,050 U

  Correct

Explanation

AH × AR = $14,100

Labor rate variance = (AH × AR) − (AH × SR)

= ($14,100) − (550 hours × $11.00 per hour)

= $14,100 − $6,050

= $8,050 U

The following labor standards have been established for a particular product:

The following labor standards have been established for a particular product:

Standard labor-hours per unit of output		7.6	hours
Standard labor rate	$	15.30	per hour

The following data pertain to operations concerning the product for the last month:

Actual hours worked		9,700	hours
Actual total labor cost	$	145,500
Actual output		1,000	units

What is the labor rate variance for the month?

Multiple Choice

• $2,910 F

  Correct
• $300 F
• $2,910 U
• $300 U

Explanation

AH × AR = $145,500

Labor rate variance = (AH × AR) − (AH × SR)

= ($145,500) − (9,700 hours × $15.30 per hour)

= $145,500 − $148,410

= $2,910 F

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables.

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 3,400 of these meals using 1,300 direct labor-hours. The company paid its direct labor workers a total of $16,900 for this work, or $13.00 per hour.

According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $12.00 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 3,400 meals? 

2. What is the standard labor cost allowed (SH × SR) to prepare 3,400 meals?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

Explanation

1.

Number of meals prepared (a)	3,400
Standard direct labor-hours per meal (b)	0.40
Standard labor-hours allowed (a) × (b)	1,360

2.

Standard labor-hours allowed (a)		1,360
Standard direct labor cost per hour (b)	$	12.00
Standard labor cost allowed (a) × (b)	$	16,320

3.

Actual cost incurred (a)	$	16,900
Standard labor cost allowed (b)	$	16,320
Labor spending variance (a) – (b)	$	580	U

4.

Actual Hours of Input, at the Actual Rate				Actual Hours of Input, at the Standard Rate			Standard Hours Allowed for Output, at the Standard Rate
(AH × AR)				(AH × SR)			(SH × SR)
1,300 hours × $13.00 per hour				1,300 hours × $12.00 per hour			1,360 hours × $12.00 per hour
= $16,900				= $15,600			= $16,320
	Labor rate variance, $1,300 U				Labor efficiency variance, $720 F
		Spending Variance, $580 U

Thanks