V: Computing Variances Using Standard and Actual Costs

Access Part V of the IG009 Assessment Scenarios document. You are the senior controller for Healing Touch, a manufacturer of high-quality products designed to help support healthy spines. Its newest product offering is a massage chair and you plan to perform a variance analysis of the chairs manufactured this month to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined. Assuming that Healing Touch manufactured 500 massage chairs this month, use the data contained in Part V of the Assessment Scenarios document to calculate all materials and labor variances in Excel (or other spreadsheet software). Be sure to include price, quantity, wage rate, and labor efficiency variances.

Standard Cost Sheet: Massage Chair

Metal tubing

6 meters @ $3

$18.00

Leather

2 square meters @ $7

14.00

Padding

3 kilograms @$4

12.00

Direct labor

4 hours @ $15

60.00

Total standard cost

$104.00

Actual Costs Incurred for the Month: Massage Chair

Metal tubing

3,100 meters

$9,455

Leather

1,100 square meters

7,722

Padding

1,600 kilograms

6,560

Direct Labor

1,800 hours

27,270

Total cost

$51,007

I need help computing the Labor Efficiency Variances.