Earthern Ware is a manufacturer of large flower pots for urban settings. The company has these standards: (Click the con to view the standards )(Click the icon to view the actual results.) Requirements 1. Compute the direct labor rate variance and the direct labor efficiency variance. 2. What is the total variance for direct labor? 3. Who is generally responsible for each variance? 4 Interpret the variances 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 DL rate vanance x ( x ( Now compute the direct labor efficiency variance. First determine the formula for the efficiency variance, then compute the efficiency variance for direct labor ) # DL efficiency variance x ( Requirement 2. What is the total variance for direct labor? (Enter the amount as a positive number Label the vaniance as favorable (F) or unfavorable (U) ) The total variance for direct labor is Requirement 3. Who is generally responsible for each variance? The purchasing for the labor efficiency variance Requirement 4. Interpret the variances The lunfavorable labor rate variance means that Watermate's employees earned per hour than budgeted department is responsible for the labor rate variance. The purchasing department is responsible The favorable labor efficiency variance means that t actually tookdirect labor hours than t should have to produce 1,000 pots. Earthern Ware allocated fixed manufacturing overhead to producti ours. Last month, the company reported the following actual results for the production of 1,000 flower pots Purchased 9,100 pounds at a cost of $3.50 per pound; Used 8,400 pounds to produce 1,000 pots . Worked 2.5 hours per flower pot (2,500 total DLH) at a cost of $18.00 per hour Direct materials Direct labor Actual variable manufacturing overhead$7.40 per direct labor hour for total actual variable manufacturing overhead of $18,500 $21,500 Actual fixed manufacturing overhead Standard fixed manufacturing overhead allocated based on actual production $24,000 Data Table Direct materials (resin) 8 pounds per pot at a cost of $3.00 anan et the r ate Standard variable manufacturing per pound 2.0 hours at a cost of $22.00 per hour Direct labor $7.00 per direct labor hour overhead rate Budgeted fixed manufacturing overhead Standard fixed MOH rate or effic $12.00 per direct labor hour (DLH)
