Petra's Music manufactures harmonicas. Petra uses standard costs to judge performance. Recently, a clerk mistakenly threw away
Question:
Petra's Music manufactures harmonicas. Petra uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and Petra has only partial data for October. She knows that the direct labor flexible budget variance for the month was \(\$ 2,050 \mathrm{~F}\) and that the standard labor rate was \(\$ 10\) per hour. The actual labor rate was \(\$ 9.50\) per hour. The standard direct labor hours for actual October output were 6,000 .
Requirements
1. Find the actual number of direct labor hours worked during October. First, calculate the standard labor cost. Next, calculate the actual labor cost by subtracting the favorable flexible budget variance of \(\$ 2,050\) from the standard labor cost. Finally, divide the actual labor cost by the actual labor rate per hour.
2. Compute the direct labor price and efficiency variances. Do these variances suggest the manager may have made a trade-off? Explain.
Step by Step Answer: