I need some help with Chapter 7 problem 39 Direct labor variances:price, efficie
ID: 2710846 • Letter: I
Question
I need some help with Chapter 7 problem 39 Direct labor variances:price, efficiency, mix, and yield. (1) It is asking 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 acmount 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 yield variances. How do these numbers relate to the total direct labor efficiency variance? What do these variances tell you?
Thank you for your help
Given Numbers
George 6 hours $30 per hour Cost of Guitar $180, Earl 4 hours $20 per hour $80 Cost of guitar
Geroge (145 hours) = $4350 Earl (108 hours) = 2,160 Total actual direct labor costs $6,510
That is, each guitar is budgeted to require 10 hours of direct labor, composed of 60% of George's labor and 40% of Earls labor, although sometimes Earl works more hours on a particular guitar and George less, or vica versa, with no obvious change in the quailty or function of the guitar
Explanation / Answer
1)Total labor hours required for 25 guitars as budgeted=25*10 hrs=250hrs
Budgeted labor hours for George =60% of labor=60% of 250 hrs= 150 hrs
Budgeted labor hours for Earl =40% of labor=40% of 250 hrs= 100 hrs
the budgeted cost of direct labor for 25 guitars=$30 per hour*150 hrs + $20 per hour*100 hrs=4500+2000=$6500
Thus the budgeted cost of direct labor for 25 guitars is $6500.
2)direct labor price for George =$30 per hour*145hrs=$4350
direct labor price for Earl=$20 per hour*108 hrs=$2160
Total direct labor price=$4350+ 2,160=$6510
efficiency variances=Standard cost of actual hours-standard cost
for Geroge ,efficiency variance=$4350-4500=$-150
for Earl,efficiency variance=$2,160-2000=$160
In total,direct labor efficiency variance=$6510-6000=$10
3)Actual Total labor hours used for 25 guitars actually=145+108 hrs=253 hrs
actual direct labor input mix percentage=145/253 %=57.31% for George and 108/253 %=42.69 % for Earl.
the budgeted amount of George's and Earl's labor that should have been used for the 25 guitars is 60% and 40 % of actual labor hours respectively.
4) total direct labor yield variance=253 hrs- 250 hrs=3 hrs
total direct labor mix variance=$6,510*(.5731+.4269)-$6500*(.6+.4)=$10 is equal to the total direct labor efficiency variance.
The total direct labor yield variance tells how much extra total labor hours were put in for direct labor than budgeted.Its + 3 hrs. total direct labor mix variance tells how much extra cost is being used in direct labor with the actual mix of direct labor used as compared to the budgeted labor used.direct labor efficiency variance also tells the difference between the actual labor cost and the budgeted labor cost.