Chapter 11, Problem 11.57BP

Work backward through labor variances (Learning Objective 3)

Folklore Music manufactures harmonicas. Folklore uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and only partial data for July exist. Folklore knows that the total direct labor variance for the month was $350 F and that the standard labor rate was $11 per hour. A recent pay cut caused a favorable labor rate variance of $0.40 per hour. The standard direct labor hours for actual July outputs were 5,910.

Requirements

1. 1. Find the actual number of direct labor hours worked during July. First, find the actual direct labor rate per hour. Then, determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given.
2. 2. Compute the direct labor rate and efficiency variances. Do these variances suggest that the manager may have made trade-offs? Explain.