Question

1.Majer Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.4	ounces	$	3.00	per ounce	$	19.20
Direct labor		0.4	hours	$	13.00	per hour	$	5.20
Variable overhead		0.4	hours	$	5.00	per hour	$	2.00

The company reported the following results concerning this product in February.

Originally budgeted output		4,800	units
Actual output		4,900	units
Raw materials used in production		30,230	ounces
Actual direct labor-hours		1,910	hours
Purchases of raw materials		32,600	ounces
Actual price of raw materials	$	2.90	per ounce
Actual direct labor rate	$	12.40	per hour
Actual variable overhead rate	$	4.90	per hour

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor efficiency variance for February is:

Multiple Choice

$650 U

$650 F

$620 F

$620 U

2. Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.5	ounces	$	2.00	per ounce	$	13.00
Direct labor		0.2	hours	$	23.00	per hour	$	4.60
Variable overhead		0.2	hours	$	6.00	per hour	$	1.20

The company reported the following results concerning this product in June.

Originally budgeted output		2,700	units
Actual output		2,800	units
Raw materials used in production		19,380	ounces
Purchases of raw materials		21,400	ounces
Actual direct labor-hours		500	hours
Actual cost of raw materials purchases	$	40,660
Actual direct labor cost	$	12,050
Actual variable overhead cost	$	3,100

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor rate variance for June is:

Multiple Choice

$616 F

$616 U

$550 F

$550 U

Answer 1

• Question 1

--Working

Actual DATA for		4900	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	1910	$              12.40	$           23,684.00

Standard DATA for		4900	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 0.4 hrs x 4900 units)=1960 hrs	$                13.00	$       25,480.00

--Answer

Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1960	-	1910	)	x	$                        13.00
	650
	Variance		$                  650.00			Favourable-F

--Correct Answer = Option #2: $ 650 F

• Question 2

--Working

Actual DATA for		2800	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	500	$              24.10 [12050 / 500]	$           12,050.00

Standard DATA for		2800	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 0.2 hrs x 2800 units)=560 hrs	$                23.00	$       12,880.00

--Answer

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     23.00	-	$                    24.10	)	x	500
	-550
	Variance		$                  550.00			Unfavourable-U

--Correct Answer = Option #4 $ 550 U