Exercise 8-10 Labor and Variable Manufacturing Overhead Variances [LO5, LO6]

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:

Standard Hours	Standard Rate per Hour	Standard Cost
24 minutes	$ 6.20	$ 2.48

During July, 8,560 hours of direct labor time were required to make 19,400 discs. The direct labor cost totaled $51,360 for the month.

Required:
1a.	According to the standards, what direct labor cost should have been incurred to make the 19,400 discs? (Do not round intermediate calculations.)

Total standard direct labor cost

$

1b.

By how much does this differ from the cost that was incurred? (Input the amount as a positive value. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Spending variance

$

(Click to select) U F None

2.

Break down the difference in cost from (1) above into a labor efficiency variance and a labor rate variance. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Labor efficiency variance	$	(Click to select) F None U
Labor rate variance	$	(Click to select) None U F

3.

The budgeted variable manufacturing overhead rate is $4.10 per direct labor-hour. During July, the company incurred $41,088 in variable manufacturing overhead cost. Compute the variable overhead efficiency and rate variances for the month. (Input all amounts as positive values. Do not round intermediate calculations. Round your final answers to the nearest dollar amount. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Variable overhead efficiency variance	$	(Click to select) U None F
Variable overhead rate variance	$	(Click to select) U None F

NEED ANSWER