Labor and Variable Manufacturing Overhead Variances [LO2, LO3]

Hollowell Audio, Inc., manufactures military-specification compact discs. The company uses standards to control its costs. The labor standards that have been set for one disc are as follows:

During July, 2,125 hours of direct labor time were required to make 20,000 discs. The direct labor cost totaled $49,300 for the month.
Required:
1. According to the standards, what direct labor cost should have been incurred to make the 20,000 discs? By how much does this differ from the cost that was incurred?
2. Break down the difference in cost from (1) above into a labor rate variance and a labor efficiency v ariance.
3. The budgeted variable manufacturing overhead rate is $16.00 per direct labor-hour. During July, the company incurred $39,100 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Transcribed Image Text:

Standard Hours Standard Rate Standard per Hour Cost 6 minutes $24.00 $2.40