Question

In: Accounting

1. Direct Labor Variances Bellingham Company produces a product that requires 4 standard hours per unit...

1.

Direct Labor Variances

Bellingham Company produces a product that requires 4 standard hours per unit at a standard hourly rate of $22.00 per hour. If 5,000 units required 20,800 hours at an hourly rate of $20.90 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) total direct labor cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct labor rate variance $
b. Direct labor time variance $
c. Total direct labor cost variance $

2.

Factory Overhead Volume Variance

Dvorak Company produced 4,100 units of product that required 4.5 standard hours per unit. The standard fixed overhead cost per unit is $2.20 per hour at 17,350 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
$ Favorable

Solutions

Expert Solution

1. Direct labor variances:

Standard hours required to produce 5,000 units = 5,000 x 4 = 20,000 hours.

Actual hours used to produce 5,000 units = 20,800 hours

Standard rate = $22.00 per hour

Actual rate = $20.90 per hour

Now,

Direct labor rate variance -$22,880
Direct labor time variance $17,600
Total direct labor cost variance -$5,280

(a) Direct labor rate variance = (Standard rate - Actual rate) x Actual hours

= ($22.00 - $20.90) x 20,800

= $22,880 Favorable

(b) Direct labor time variance = (Standard hours - Actual hours) x Standard rate

= (20,000 - 20,800) x $22.00

= $17,600 Unfavorable

(c) Total direct labor cost variance = (Standard hours x Standard rate) - (Actual hours x Actual rate)

= (20,000 x $22.00) - (20,800 x $20.90)

=$440,000 - $434,720

= 5,280 Favorable

2. Factory overhead volume variance:

Applied fixed overhead = No. of units produced x Standard hours required per unit x Standard rate per unit

= 4,100 Units x 4.5 hours x $2.20 per hour

= $40,590

Budgeted fixed overhead = Standard hours x standard rate

= 17,350 x $2.20

= $38,170

Now,

Factory overhead volume variance - $2,420

Factory overhead volume variance = Applied fixed overhead - Budgeted fixed overhead

= $40,590 - $38,170

= $2,420 Favorable


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