Question

# Solving for Unknowns Misterio Company uses a standard costing system. During the past quarter, the following...

Solving for Unknowns

Misterio Company uses a standard costing system. During the past quarter, the following variances were computed:

 Variable overhead efficiency variance \$ 31,080 U Direct labor efficiency variance 155,400 U Direct labor rate variance 11,988 U

Misterio applies variable overhead using a standard rate of \$2 per direct labor hour allowed. Two direct labor hours are allowed per unit produced. (Only one type of product is manufactured.) During the quarter, Misterio used 35 percent more direct labor hours than should have been used.

Required:

1. What were the actual direct labor hours worked?
fill in the blank 1 hours

What are the total hours allowed?
fill in the blank 2 hours

2. What is the standard hourly rate for direct labor?
\$fill in the blank 3 per hour

What is the actual hourly rate? Round your answer to the nearest cent.
\$fill in the blank 4 per hour

3. How many actual units were produced?
fill in the blank 5 units

SOLUTION

1a. Overhead efficiency variance is \$31,080

Standard Overhead rate per hour is \$2

Hence excess time required is \$31,080 / 2 = 15,540 Hours which is 35% more than hours which should have been used.

Actual hours will be = 15,540 + (15,540 / 35%)

= 15,540 + 44,400 = 59,940

1b. Allowed hours= Excess hours / 35%

15,540 / 35% = 44,400

2a. Direct labor efficiency variance = 155,400

Excess hours required =15,540

Standard Hourly rate = \$155,400 / 15,540 = \$10

2b. Labor rate variance = Actual hours * (Actual rate - Standard rate)

11,988 = 59,940 * (Actual rate - \$10)

Actual rate = 10.20

3. Standard Time to produce units = 44,400

Standard time per unit = 2

Actual units produced = 44,400 / 2 = 22,200