Question
CenterWare is a manufacturer of large flower pots for urban settings. The company has these standards: Direct materials (resin) - 8 pounds per pot at
CenterWare is a manufacturer of large flower pots for urban settings. The company has these standards:
Direct materials (resin) - 8 pounds per pot at a cost of $5.00 per pound
Direct labor - 3.0 hours at a cost of $14.00 per hour
Standard variable manufacturing overhead rate - $5.00 per direct labor hour
Budgeted fixed manufacturing overhead -$17,600
Standard fixed MOH rate - $6.00 per direct labor hour (DLH)
CenterWare allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of 1,200
flower pots:
Direct materials - Purchased 10,680 pounds at a cost of $5.30 per pound; Used 10,080 pounds to produce 1,200 pots.
Direct labor - Worked 3.4 hours per flower pot (4,080 total DLH) at a cost of $13.00 per hour
Actual variable manufacturing overhead - $5.40 per direct labor hour for total actual variable manufacturing overhead of $22,032
Actual fixed manufacturing overhead - $17,300
Standard fixed manufacturing overhead allocated based on actual production - $21,600
Requirement 1. Compute the direct labor rate variance and the direct labor efficiency variance. (Enter the variances as positive numbers. Enter the currency amounts in the formulas to the nearest cent, then round the final variance amounts to the nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations used: DL = Direct labor)
Begin with the direct labor rate variance. First determine the formula for the rate variance, then compute the rate variance for direct labor.
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