Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons Actual man hour rate varies from the standard man hour rate and/or Actual efficiency of labor employed varies from the standard efficiency. Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance. Labor Rate Variance: The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance. Labor Efficiency Variance: The difference between actual man hours and standard man hours is the Labor Efficiency Variance. The following formulas are used to calculate Labor Cost Variance: Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV) Also, LCV= Standard Cost −Actual Cost of labor Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked. Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable. Direct Labour rate and Efficiency Variance

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Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 23, Problem 11QS

To determine

Concept Introduction:

Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons

Actual man hour rate varies from the standard man hour rate and/or

Actual efficiency of labor employed varies from the standard efficiency.

Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.

Labor Rate Variance:

The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.

Labor Efficiency Variance:

The difference between actual man hours and standard man hours is the Labor Efficiency Variance.

The following formulas are used to calculate Labor Cost Variance:

Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)

Also, LCV= Standard Cost −Actual Cost of labor

Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost

Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.

Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.

Direct Labour rate and Efficiency Variance

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Problem No. 1 On January 1, 2025, Manuel Cruz and Sherimae Diasalo agreed to form a partnership that will manufacture and sell biscuits. The partnership agreement specified that Cruz is to invest cash of P1,000,000 and Diasalo is to contribute land and building to serve as the office and factory of the business. The following amounts are applicable to the property of Diasalo: Acquisition Cost Fair Market Value Land Building P1,000,000 500,000 P1,500,000 850,000 During the formation, it was found out that Cruz has accounts receivable amounting to P70,000 and the partners agreed that it will be assumed by the partnership. The name of the partnership will be Fita Pan. Required: 1. Prepare journal entry to record: a. The investment of Cruz to the partnership b. The investment of Diasalo to the partnershipood relay ni 000,219 2. Prepare the statement of financial position of the partnership as of January 1, 2025 Problem No. 2 The trial balance of Cleint Lumanao Nacho Supplies on February…

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Answer 2

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Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 23, Problem 11QS

To determine

Concept Introduction:

Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons

Actual man hour rate varies from the standard man hour rate and/or

Actual efficiency of labor employed varies from the standard efficiency.

Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.

Labor Rate Variance:

The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.

Labor Efficiency Variance:

The difference between actual man hours and standard man hours is the Labor Efficiency Variance.

The following formulas are used to calculate Labor Cost Variance:

Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)

Also, LCV= Standard Cost −Actual Cost of labor

Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost

Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.

Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.

Direct Labour rate and Efficiency Variance

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Check out a sample textbook solution

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Answer 3

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 23, Problem 11QS

To determine

Concept Introduction:

Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons

Actual man hour rate varies from the standard man hour rate and/or

Actual efficiency of labor employed varies from the standard efficiency.

Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.

Labor Rate Variance:

The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.

Labor Efficiency Variance:

The difference between actual man hours and standard man hours is the Labor Efficiency Variance.

The following formulas are used to calculate Labor Cost Variance:

Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)

Also, LCV= Standard Cost −Actual Cost of labor

Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost

Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.

Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.

Direct Labour rate and Efficiency Variance

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 23, Problem 11QS

To determine