Question

Four Seasons Industries has established direct labor performance standards for its maintenance and repair shop. However, some of the labor records were destroyed during a recent fire. The actual hours worked during August were 2,500, and the total direct labor budget variance was $1,300 unfavorable. The standard labor rate was $16 per hour, but recent resignations allowed the firm to hire lower-paid replacement workers for some jobs, and this produced a favorable rate variance of $3,500 for August.

a. Calculate the actual direct labor rate paid per hour during August.
b. Calculate the dollar amount of the direct labor efficiency variance for August.
c.Calculate the standard direct labor hours allowed for the actual level of activity during August. (Hint: Use the formula for the quantity variance and solve for the missing information.)

Answer 1

Answer:

actual rate = $14.60

labor efficiency 4,800 U

std hours = 2,200

Explanation:

DIRECT labor VARIANCES

$(standard\:rate-actual\:rate) \times actual \: hours = DL \: rate \: variance$

std rate         $16.00

actual rate       X

actual hours 2,500

rate variance  $3,500.00

$(16-actual\:rate) \times 2,500 = 3,500$

$actual\:rate= 16 - 3,500 \div 2,500$

actual rate = $14.60

total variance 1,300 unfavorable

3,500 favorable + efficiency = 1,300 U

efficieny = 1,300 + 3,500 = 4,800 U

$(standard\:hours-actual\:hours) \times standard \: rate = DL \: efficiency \: variance$

std  hours X

actual hours 2500.00

std rate  $16.00

efficiency variance  $(4,800.00)

$(standard\:hours-2,500) \times 16 = -4800$

$standard\:hours = -4,800/16 + 2,500$

std hours = 2,200