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10 May, 22:54

Coronado Family Instruments makes cellos. During the past year, the company made 6,370 cellos even though the budget planned for only 5,500. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.

Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

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  1. 10 May, 22:59
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production = 6,370 cellos

    The Budget production = 5,500.

    The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate.

    The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.

    To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

    Direct labor time (efficiency) variance = (Standard Quantity - Actual Quantity) * standard rate

    Direct labor time (efficiency) variance = (4*6,370 - 25,000) * 14

    Direct labor time (efficiency) variance = $6,720 favorable

    Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

    Direct labor rate variance = (14 - 15) * 25,000

    Direct labor rate variance = $25,000 unfavorable
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