Question

In: Accounting

Smith Tax Services prepares tax returns for senior citizens. The standard in terms of​ (direct labor)...

Smith Tax Services prepares tax returns for senior citizens. The standard in terms of​ (direct labor) time spent on each return is

2hours. The direct labor standard wage rate at the firm is $ 17.00

per hour. Last​ month,1,770 direct labor hours were used to prepare 900 tax returns. Total wages were

$30,975.

Read the requirements

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.

Requirement 1. What is the actual​ (direct labor) wage rate per hour paid last​ month? ​(Round your answer to the nearest​ cent.)

The actual (direct labor) wage rate per hour paid last month is $

.

Enter any number in the edit fields and then click Check Answer.

Requirements

1.

What is the actual​ (direct labor) wage rate per hour paid last​ month?

2.

What is the direct labor rate​ variance?

3.

What is the direct labor efficiency​ variance?

4.

How might the direct labor rate variance for the firm last month be causing the direct labor efficiency​ variance?

Solutions

Expert Solution

(1). Actual direct labor wage rate per hour;

Total actual wages = $30975

Actual direct labor hours = 1770

So, Actual direct labor wage rate per hour ($30975 / 1770) = $17.50

(2). Direct labor rate​ variance;

Formula for direct labor rate variance is as follow;

Direct labor rate variance =

(Standard wage rate – Actual wage rate) * Actula direct labor hours

Actual direct labor hours = 1770

Actual direct labor wage rate = $17.50

Standard direct labor wage rate = $17

Now let put values in the formula;

Direct labor rate variance ($17.50 – $17) * 1770 = $885 (Unfavourable)

(3). Direct labor efficiency​ variance;

Formula for direct labor efficiency variance is as follow;

Direct labor efficiency variance =

(Standard wage hours – Actual wage hours) * Standrad direct labor rate

Actual direct labor hours = 1770

Standard direct labor hours (2 * 900) = 1800

Standard direct labor wage rate = $17

Now let put values in the formula;

Direct labor efficiency variance (1800 – 1770) * 17 = $510 (Favourable)

(4).

As per information of the question it is clear that actual rate is higher than standard rate by $0.50 but for calculating efficiency variance we use standard rate not actual rate hence difference will affect efficiency variance based on difference between actual and standard hours.

ekkarill92 answered 2 years ago
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