Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the following standards for materials and labor: Leather (12 strips @ $20) $240 Direct labor (10 hours @ $12) $120 Total prime cost $360 During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour. Calculate the labor rate variance and the labor efficiency variance, respectively. Group of answer choices $4,500 U and $3,000 U $4,500 F and $3,000 F $4,500 U and $3,000 F $4,500 F and $3,000 U
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
|
Leather (12 strips @ $20) |
$240 |
|
Direct labor (10 hours @ $12) |
$120 |
|
Total prime cost |
$360 |
During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.
Calculate the labor rate variance and the labor efficiency variance, respectively.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
