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:

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.
In August, Joseph manufactures 25 guitars. Actual direct labor costs are as follows:

Required

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 yield variances. How do these numbers relate to the total direct labor efficiency variance? What do these variances tell you?

Transcribed Image Text:

George Earl Quantity 6 hours 4 hours Price per Hour of Labor $30 per hour $20 per hour Cost for One Guitar $180 80