Kellogg Company manufacturers and markets ready-to-eat cereal and convenience foods including Raisin Bran, Pop Tarts, Rice Krispies Treats, and Pringles. In addition to the raw materials used when producing its products, Kellogg Company also has significant labor costs associated with the products. As of January 2, 2016, Kellogg Company had approximately 33,577 employees. A shortage in the labor pool, regulatory measures, and other pressures could increase the company's labor cost, having a negative impact on the company's operating income. Read the requirements Requirement 1. Suppose Kellogg Company noticed an increase in its actual direct labor costs compared to the budgeted amount. How could Kellogg Company investigate this? The direct labor variance should be investigated by exploring both the direct labor cost variance and the direct labor efficiency variance. Requirement 2. What is the direct labor cost variance and how would a company calculate this variance? This variance measures how well the business The direct labor cost variance measures the difference between the actual amount paid for direct labor (actual cost) and the amount that should have been paid (standard cost). keeps its unit costs of labor input within standards. It is calculated as (Actual Cost - Standard Cost) x Actual Quantity Requirement 3. What is the direct labor efficiency variance and how would a company calculate this variance? This variance measures how well the business The direct labor efficiency variance measures the difference between the actual labor hours (actual quantity) and the labor hours that should have been used (standard quantity). uses its human resources It is calculated as (Actual Quantity - Standard Quantity) Standard Cost Requirement 4. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor cost variance. What measures could Kellogg Company take to control this variance? Kellogg Company should If the total direct labor variance is unfavorable and it is due completely to the direct labor cost variance, this means that the actual cost of labor was higher than the budgeted cost. investigate why its cost of labor increased. Requirement 5. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor efficiency variance. What measures could Kellogg Company take to control this variance? If the total direct labor variance is unfavorable and it is due completely to the direct labor efficiency variance, this means that the company's workers were not as efficient as the company expected them to be. 'Kellogg Company should investigate why it took the workers longer to produce the products than expected. Requirements 1. Suppose Kellogg Company noticed an increase in its actual direct labor costs compared to the budgeted amount. How could Kellogg Company investigate this? 2. What is the direct labor cost variance and how would a company calculate this variance? 3. What is the direct labor efficiency variance and how would a company calculate this variance? 4. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor cost variance. What measures could Kellogg Company take to control this variance? 5. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor efficiency variance. What measures could Kellogg Company take to control this variance? Print Done Kellogg Company manufacturers and markets ready-to-eat cereal and convenience foods including Raisin Bran, Pop Tarts, Rice Krispies Treats, and Pringles. In addition to the raw materials used when producing its products, Kellogg Company also has significant labor costs associated with the products. As of January 2, 2016, Kellogg Company had approximately 33,577 employees. A shortage in the labor pool, regulatory measures, and other pressures could increase the company's labor cost, having a negative impact on the company's operating income. Read the requirements Requirement 1. Suppose Kellogg Company noticed an increase in its actual direct labor costs compared to the budgeted amount. How could Kellogg Company investigate this? The direct labor variance should be investigated by exploring both the direct labor cost variance and the direct labor efficiency variance. Requirement 2. What is the direct labor cost variance and how would a company calculate this variance? This variance measures how well the business The direct labor cost variance measures the difference between the actual amount paid for direct labor (actual cost) and the amount that should have been paid (standard cost). keeps its unit costs of labor input within standards. It is calculated as (Actual Cost - Standard Cost) x Actual Quantity Requirement 3. What is the direct labor efficiency variance and how would a company calculate this variance? This variance measures how well the business The direct labor efficiency variance measures the difference between the actual labor hours (actual quantity) and the labor hours that should have been used (standard quantity). uses its human resources It is calculated as (Actual Quantity - Standard Quantity) Standard Cost Requirement 4. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor cost variance. What measures could Kellogg Company take to control this variance? Kellogg Company should If the total direct labor variance is unfavorable and it is due completely to the direct labor cost variance, this means that the actual cost of labor was higher than the budgeted cost. investigate why its cost of labor increased. Requirement 5. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor efficiency variance. What measures could Kellogg Company take to control this variance? If the total direct labor variance is unfavorable and it is due completely to the direct labor efficiency variance, this means that the company's workers were not as efficient as the company expected them to be. 'Kellogg Company should investigate why it took the workers longer to produce the products than expected. Requirements 1. Suppose Kellogg Company noticed an increase in its actual direct labor costs compared to the budgeted amount. How could Kellogg Company investigate this? 2. What is the direct labor cost variance and how would a company calculate this variance? 3. What is the direct labor efficiency variance and how would a company calculate this variance? 4. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor cost variance. What measures could Kellogg Company take to control this variance? 5. Suppose that Kellogg Company found an unfavorable total direct labor variance that was due completely to the direct labor efficiency variance. What measures could Kellogg Company take to control this variance? Print Done