The standard direct labor cost per unit for a company was $21 (= $14 per hour ? 1.5 hours per unit). During the period, actual direct labor costs amounted to $136,500, 9,600 labor-hours were worked, and 5,600 units were produced.

RequiredCompute the direct labor price and efficiency variances for the period. (Refer to Exhibit 16.9 for the format to use.)

Transcribed Image Text:

(2) Actual Inputs at (1) (3) Flexible Production Actual Standard Price Budget Actual labor price (AP = $18) x Actual quantity Standard labor price (SP = $20) x Standard quantity (SQ = 4,000 hours) Standard labor price (SP = $20) x Actual quantity (AQ = 4,400 hours) of direct labor (AQ = 4,400 hours) of direct labor of direct labor allowed for actual output (AP x AQ) (SP x AQ) (SP x SQ) $20 x 4,400 = $88,000 $18 x 4,400 = $79,200 $20 x 4,000 = $80,000 %3! Price variance $79,200 – $88,000 = $8,800 F Efficiency variance $88,000 – $80,000 = $8,000 U (SPx AQ) – (SP x SQ) = SP x (AQ – SQ) = $20 x (4,400 - 4,000) = $8,000 U Shortcut formulas: (AP x AQ) – (SP x AQ) = (AP - SP) x AQ %3D = ($18 – $20) x 4,400 = $8,800 F Total varlance = $800 F