is a manufacturer of large flower pots for urban settings. The company has these standards:

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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.

Direct materials (resin). . . . . . . . . . . . . . . . . . . . . . .	13 pounds per pot at a cost of $4.00
	per pound
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . .	2.0 hours at a cost of $17.00 per hour
Standard variable manufacturing
overhead rate. . . . . . . . . . . . . . . . . . . . . . . . .	$6.00 per direct labor hour
Budgeted fixed manufacturing overhead. . . . . . . . .	$25,000
Standard fixed MOH rate. . . . . . . . . . . . . . . . . . . . .	$10.00 per direct labor hour (DLH)

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 comma 3001,300

flower pots:

Direct materials. . . . . . . . . . . . . . . . . . . . .	Purchased 17,960 pounds at a cost of
	$4.50 per pound; Used 17,160 pounds to
	produce 1,300 pots
Direct labor. . . . . . . . . . . . . . . . . . . . . . . .	Worked 2.4 hours per flower pot (3,120
	total DLH) at a cost of $16.00 per hour
Actual variable manufacturing overhead. . . . .	$6.50 per direct labor hour for total
	actual variable manufacturing overhead
	of $20,280
Actual fixed manufacturing overhead. . . . . . .	$24,600
Standard fixed manufacturing overhead
allocated based on actual production. . . . . . .	$26,000

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.

		x (		-		)	=	DL rate variance
		x (		-		)	=

Now compute the direct labor efficiency variance. First determine the formula for the efficiency variance, then compute the efficiency variance for direct labor.

		x (		-		)	=	DL efficiency variance
		x (		-		)	=

Requirement 2. What is the total variance for direct labor? (Enter the amount as a positive number. Label the variance as favorable (F) or unfavorable (U).)

The total variance for direct labor is

.

Requirement 3. Who is generally responsible for each variance?

The

human resources or personnel

production

purchasing

sales

department is responsible for the labor rate variance. The

human resources or personnel

production

purchasing

sales

department is responsible for the labor efficiency variance.

Requirement 4. Interpret the variances.

The

favorable

unfavorable

labor rate variance means that

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employees earned

less

more

per hour than budgeted.

The

favorable

unfavorable

labor efficiency variance means that it actually took

less

more

direct labor hours than it should have to produce

1 comma 3001,300

pots.