I really need to see how you arrived at the answer if possible so I can vsualize
ID: 2515479 • Letter: I
Question
I really need to see how you arrived at the answer if possible so I can vsualize it. Thank you.
Cost Accounting, A Managerial Emphasis, 15th Edition (Horngren, Datar, Rajan) Chapter 7, Question 7-39, Page 284 Direct labor variances: price, efficiency, mix, and yield. Trevor Joseph employs two workers in his guitar-making business. The first worker, George, has been making guitars for 20 years and is paid $30 per hour. The second worker, Earl, is less experienced and is paid $20 per hour. One guitar requires, on average, 10 hours of labor. The budgeted direct labor quantities and prices for one guitar are as follows: Quantity 6 hours 4 hours Price per Hour of Labor S30 per hour S20 per hour Cost for One Guitar George Earl S180 80 That is, each guitar is budgeted to require 10 hours of direct labor, composed of 60% of George's labor and 40% of Earl's, although sometimes Earl works more hours on a particular guitar and George less, or vice versa, with no obvious change in the quality or function of the guitar. During the month of August, Joseph manufactures 25 guitars. Actual direct labor costs are as follows: S4,350 2,160 S6,510 George (145 hours) Earl (108 hours) Total actual direct labor cost 1. What is the budgeted cost of direct labor for 25 guitars? 2. Calculate the total direct labor price and efficiency variances. 3. For the 25 guitars, what is the total actual amount of direct labor used? What is the actual direct labor input mix percentage? What is the budgeted amount of George's and Earl's labor that should have been used for the 25 guitars? 4. Calculate the total direct labor mix and vield variances. How do these numbers relate to the total direct labor efficiency variance? What do these variances tell vou?Explanation / Answer
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Budget Budgeted Input Hourly Cost Per Worker Hours Mix Pay Guitar George 6 60% $30 $180 Earl 4 40% $20 $80 Total 10 100% $260 Acutal Actual hrs. Total Actual for 25 Actual Labor Price per Worker guitars Mix Cost Hour George 145 57.31% $4,350 $30.00 Earl 108 42.69% $2,160 $20.00 Total 253 100.00% $6,510 1. What is the budgeted cost of direct labor for the 25 guitars? 25 Guitar*Cost per guitar 25*260 6500 2. Calculate the total direct labor price and efficiency variance. Actual Quantity (Hrs.) Actual Quantity (Hrs.) Actual Quantity (Hrs.) Budgeted Quantity (Hrs.) Actual Mix Actual Mix Budgeted Mix Budgeted Mix Actual Price Budgeted Price Budgeted Price Budgeted Price #DIV/0! George $4,350 $0 F $4,350 ($204) F $4,554 $54 U $4,500 0.012 $54.00 Earl $2,160 $0 F $2,160 $136 U $2,024 $24 U $2,000 0.012 Total $6,510 $0 F $6,510 ($68) F $6,578 $78 U $6,500 0.012 Price Var. Mix Var. Yield Var. Efficiency Variance: 6510-6500 10 U 3. For the 25 guitars produced, what is the total actual amount of direct labor used? Actual hrs. for 25 Worker guitars George 145 Earl 108 Total 253 For the 25 guitars produced, what is the total actual amount of Actual hrs. for 25 Actual Worker guitars Mix George 145 57.31% Earl 108 42.69% Total 253 100.00% What is the budgeted amount of George's and Earl's labor that should have been used for the 25 guitars? 25*10=250 Hours 4. Calculate the total direct labor mix and yield variances. How do these numbers relate to the total direct labor efficiency variance? Actual Quantity (Hrs.) Actual Quantity (Hrs.) Actual Mix Budgeted Mix Budgeted Price Budgeted Price 4350 -204 F 4554 54 U 2160 136 U 2024 24 U 6510 -68 F 6578 78 U Mix Var. Yield Var. Relationship U Efficiency is the sum of the mix and yield variances.