Concept explainers
Concept Introduction:
Direct Labor - Direct labor is the labor cost of the employees who convert materials into finished products.
Direct labor efficiency variance-
Direct labor efficiency variance is the variance which measures the difference between standard hours allowed and actual hours taken for the work done. If actual hours are more than the standard hours allowed then the variance is unfavorable and if actual hours are less than the standard hours allowed then the variance is favorable.
Direct labor rate variance-
Direct labor rate variance is the variance which measures the difference between standard rate and actual hourly rate paid.. If actual rate paid is more than the standard rate then the variance is unfavorable and if actual rate paid is less than the standard rate then the variance is favorable.
Requirement 1-
To compute:
Flexed budget amount and
Answer to Problem 15.9E
Explanation of Solution
Given,
- Direct labor original budget= $1,800
- Direct labor actual budget= $1,888
- Production rate = 20 books
- Pay rates = $12 per hour
- Unit of actual bound books= 2,860 books
- Actual working hours = 160 hours
Conclusion:
Thus, Flexed budget amount and Budget variance are computed.
Concept Introduction:
Direct Labor - Direct labor is the labor cost of the employees who convert materials into finished products.
Direct labor efficiency variance-
Direct labor efficiency variance is the variance which measures the difference between standard hours allowed and actual hours taken for the work done. If actual hours are more than the standard hours allowed then the variance is unfavorable and if actual hours are less than the standard hours allowed then the variance is favorable.
Requirement 2-
To calculate:
Direct labor efficiency variance.
Answer to Problem 15.9E
Explanation of Solution
Direct labor efficiency variance-
Given, actual hours worked = 160 hours
Direct labor efficiency variance is calculated as follows-
Conclusion:
Since standard hours are less than the actual works worked, hence variance is unfavorable.
Concept Introduction:
Direct Labor - Direct labor is the labor cost of the employees who convert materials into finished products.
Direct labor rate variance-
Direct labor rate variance is the variance which measures the difference between standard rate and actual hourly rate paid.. If actual rate paid is more than the standard rate then the variance is unfavorable and if actual rate paid is less than the standard rate then the variance is favorable.
Requirement 3-
To calculate:
Direct labor rate variance.
Answer to Problem 15.9E
Explanation of Solution
Given,
- Standard rate = $12
- Actual hours = 160 hours
Direct labor rate variance is calculated as follows-
Conclusion:
Since, standard rate is more than the actual rate, variance is favorable.
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Chapter 15 Solutions
Principles of Financial Accounting (Elon University)
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