Javonte Co. set standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable. (2) Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?

Javonte Co. set standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable. (2) Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Javonte Co. set standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the
company uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units of product. In November, the company uses
22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product.
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
(1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these
two months. Classify each variance as favorable or unfavorable.
(2) Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company
investigate further?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months.
Classify each variance as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
October
Antual Cant

Actual Cost
Standard Cost
November
Actual Cost
Standard Cost

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