Question

Scentsational Inc. produces a lavender air-freshener unit. They have developed standard costs for one unit as follows:

	Standard quantity or hours per unit	Standard price or rate	Standard cost
Direct materials	0.4 ounces	$12.50 per ounce	$5.00
Direct labor	2.1 dlh	$14.00 per dlh	$29.40
Variable manufacturing overhead	2.1 dlh	$3.50 per dlh	$7.35

During May, the following activities were recorded related to the production of the air-freshener:

a) The company purchased 14,550 ounces of direct materials at a unit cost of $13.50 per ounce.

b) There was no beginning inventory of direct materials, but there was ending inventory of 1,540 ounces.

c) The company’s production-line assemblers worked for 70,000 hours. They were paid a wage rate of $13.00 per hour.

e) Variable manufacturing overhead is allocated on the basis of direct labor hours. The total VMOH cost for the month was $210,000.

f) 35,000 units were produced and sold during May.

What was the direct labor spending variance for May?

Multiple Choice

• $119,000 F

• $70,000 F

• $49,000 F

• $35,000 F

Answer 1

Actual Output			35,000 units
Std Labor hours per unit		2.1 DLH
Std labor hours allowed for actual output	73500 DLH
Std Labour rate per hour		14 per DLH
Actual labour hours worked		70,000 DLH
Actual rate per hour			13 per DLH
Labour Spending variance = Std labour cost for actual output - Actual labour cost
		(Std hours allowed *Std rate) - (Actual hours worked*Actual rate)
		(73500*14) - (70000*13) = 119,000 F
Answer is 119,000 F

answered by: anonymous