Standard Costs and Variance Analysis Paper 9


Pane Company’s direct labor costs for April are as follows:
Standard direct labor hours 42,000
Actual direct labor hours 41,200
Total direct labor payroll $247,200
Direct labor efficiency variance -- favorable $ 3,840
What is Pane’s direct labor rate variance?


Lake’s direct labor costs for the month of May are as follows:
Standard direct labor hours allowed 12,500
Actual direct labor rate $8.25
Actual direct labor hours 10,000
Direct labor rate variance -- favorable $5,600
What was Lake’s standard direct labor rate in May?


Bolt Co. uses a standard-cost system. Bolt’s direct labor information for July is as follows:
Standard hours allowed for actual production 3,000
Actual rate paid per hour $9.35
Standard rate per hour $8.50
Labor efficiency variance $1,870 U
The actual hours worked equaled


Daniel Corporation’s direct labor costs for June were as follows:
Actual direct labor hours 32,000
Standard direct labor hours 33,600
Direct labor rate variance -- favorable $6,720
Standard direct labor rate per hour $5.04
Compute Daniel’s total direct labor payroll for the month of June.


A company has a direct labor price variance that is favorable. Of the following, the most serious concern the company may have about this variance is that


MinnOil performs oil changes and other minor maintenance services (e.g., tire pressure checks) for cars. The company advertises that all services are completed within 15 minutes for each service. On a recent Saturday, 160 cars were serviced, resulting in the following labor variances: rate, $19 unfavorable; efficiency, $14 favorable. If MinnOil’s standard labor rate is $7 per hour, determine the actual wage rate per hour and the actual hours worked.
Wage Rate ....Hours Worked A. B. C. D.


Lee Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information.
Direct labor (10,000 hrs. at $15 per hr.) $150,000
Variable overhead 30,000
Fixed overhead 80,000
During May, 6,000 units were produced and the direct labor efficiency variance was $1,500 unfavorable. Based on this information, the actual number of direct labor hours used in May was


Randall Company uses standard costing and flexible budgeting and is evaluating its direct labor. The flexible budget variance can usually be broken down into two other variances identified as the


A company had a total labor variance of $15,000 favorable and a labor efficiency variance of $18,000 unfavorable. The labor price variance was


The accounting records of Foster Corporation reveal a favorable labor efficiency variance for the period just ended. Which of the following comments by Foster’s executives reflect a limited knowledge of the variance investigation process?
1. “We can use statistical testing procedures to determine whether or not the variance should be investigated.”
2. “Let’s look into it. Yes, our operations might be fine; however, our standard labor time may need revision.”
3. “I don’t believe in all of these rules to decide whether or not variances should be investigated. Good judgment is the real key.”
4. “Don’t worry – the variance was caused by a random event and is well within our range of possible acceptable outcomes.”
5. “Why are you getting so upset? This is a favorable variance, so let’s forget it.”


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