Question

1.      O&A Toy Company manufactures a plastic swimming pool at its East Crest Plant.

Janet Wilson, who has just been appointed general manager of the East Crest Plant, has been given instructions to “get things under control.” Upon reviewing the plant’s income statement, Ms. Wilson has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

	Standard Quantity or Hours		Standard Price or Rate		Standard Cost
Direct materials.....................	3.0	pounds	$2.40	per pound	$  7.20
Direct labor............................	0.8	hour	$9.50	per hour	7.60
Variable manufacturing overhead	0.4	hour	$3.20	per hour	1.28

please put "-" sign if the answer is negative.

Ms. Wilson has determined that during September the plant produced 16,000 pools and incurred the following costs:

a. Worked 12,200 direct labor-hours at a cost of $10.20 per hour.

For O&A Toy company, compute:  

1.    Compute labor rate variances

2.    Compute labor efficiency variances.

2.   Oscar Company uses standard costing. For the month of April, the company reported the following data:
• Standard direct labor rate: $10 per hour
• Standard hours allowed for actual production: 8,000 hours
• Actual direct labor rate: $9.50 per hour
• Labor efficiency variance: $4,750 Unfavorable

what is the labor rate variance for April for Oscar Company?

3.   Mini Enterprise uses standard costing. For the month of April, the company reported the following data:
• Standard hours allowed for actual production: 6,230 hours
• Actual direct labor hours: 6,000hours
• Actual direct labor rate: $9.50 per hour
• Labor rate variance: $3,000 Favorable

what is the labor efficiency variance for April for Mini Enterprises?

Answer 1

1) Labor rate variance = (standard rate-actual rate)actual hour = (9.50-10.20)*12200 = 8540 U

Labor efficiency variance = (Standard hour-actual hour)standard rate = (16000*.8-12200)*9.5 = 5700 F

2) Labor efficiency variance = (standard hour-actual hour)Standard rate

-4750 = (8000*10-10X)

10X = 84750

X(actual hour) = 8475

Labor rate variance = (10-9.5)*8475 = 4237.50 F

3) Labor rate variance = (Standard rate-actual rate)actual hour

3000 = (X*6000-6000*9.5)

-6000X = -60000

X(Standard rate) = 10

Labor efficiency variance = (6230-6000)*10 = 2300 F