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Chapter 23: Q7SE (page 1307)

Martin, Inc. manufactures lead crystal glasses. The standard direct labor time is 0.5 hours per glass, at a cost of \(18 per hour. The actual results for one month鈥檚 production of 6,500 glasses were 0.2 hours per glass, at a cost of \)11 per hour. Calculate the direct labor cost variance and the direct labor efficiency variance.

Short Answer

Expert verified

The direct labor cost variance of the company is $63,700(F)

The direct labor efficiency variance of the company is $35,100(F).

Step by step solution

01

Meaning of Variances

Cost variances refer to the difference between the actual cost incurred and the budgeted costs.

02

Computation of the direct labor cost variance-

顿颈谤别肠迟鈥尘补迟别谤颈补濒鈥塩辞蝉迟鈥塿补谤颈补苍肠别=础肠迟耻补濒鈥塩辞蝉迟鈭�Standardcost脳础肠迟耻补濒鈥堑耻补苍迟颈迟测=$11鈭�$18脳6500脳1.4=$63,700鈥塅

03

Computation of the direct labor efficiency variance-

顿颈谤别肠迟鈥尘补迟别谤颈补濒鈥塭蹿蹿颈肠颈别苍肠测鈥塿补谤颈补苍肠别=础肠迟耻补濒鈥堑耻补苍迟颈迟测鈭�厂迟补苍诲补谤诲鈥堑耻补苍迟颈迟测脳厂迟补苍诲补谤诲鈥塩辞蝉迟=6500脳0.2鈭�6500脳0.5脳$18=1300鈭�3250脳18=$35,100鈥塅

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Most popular questions from this chapter

Briefly describe how journal entries differ in a standard cost system.

Question:Match the product cost variance with the manager most probably responsible. Some answers may be used more than once. Some answers may not be used.

Variance Manager

19. Variable overhead cost variance

20. Direct materials efficiency variance

21. Direct labor cost variance

22. Fixed overhead cost variance

23. Direct materials cost variance

a. Human resources

b. Purchasing

c. Production

Question:Match the variance to the correct definition.

Variance Definition

2. Cost variance

3. Efficiency variance

4. Flexible budget variance

5. Sales volume variance

6. Static budget variance

a. The difference between the expected results in the flexible budget for the actual units sold and the static budget.

b. The difference between actual results and the expected results in the flexible budget for the actual units sold.

c. Measures how well the business keeps unit costs of material and labor inputs within standards.

d. The difference between actual results and the expected results in the static budget.

e. Measures how well the business uses its materials or human resources

Murphy Company managers received the following incomplete performance report:

Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)

Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.

Identifying the benefits of standard costs

Setting standards for a product may involve many employees of the company. Identify some of the employees who may be involved in setting the standard costs, and describe what their role might be in setting those standards.
See all solutions

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