Following is a partially completed performance report for a recent week for direct labor in the binding department of a book publisher:

	Original Budget				Flexed Budget	Actual				Budget Variance
Direct labor		$	9,600				$	8,820

The original budget is based on the expectation that 6,720 books would be bound; the standard is 14 books per hour at a pay rate of $20 per hour. During the week, 7,000 books were actually bound. Employees worked 490 hours at an actual total cost of $8,820.

Required:

1. Calculate the flexed budget amount against which actual performance should be evaluated and then calculate the budget variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
2. Calculate the direct labor efficiency variance in terms of hours. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
3. Calculate the direct labor rate variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).

a.	Flexed budget	$10,000
	Budget variance
b.	Direct labor efficiency variance		hours
c.	Direct labor rate variance

Explanation:

a.

	Original Budget				Flexed Budget				Actual				Variance
Direct labor		$	9,600			$	10,000a			$	8,820			$

^(a)7,000 books / 14 books per hour = 500 Standard hours allowed $20 per hour = $10,000 Flexed budget.

b. Direct labor efficiency variance = (500 Standard hours 490 Actual hours) =. Note: if calculating DL efficiency variance in $ the calculation would be: hours $20 =

c. Direct labor rate variance = (Standard rate Actual rate) Actual hours = ($20 ($actual / 490 hours)) 490 hours = ($20 $) 490 =