Lemke Music manufactures harmonicas. Lemke uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and only partial data for July exist. Lemke knows that the total direct labor variance for the month was $390 F and that the standard labor rate was $12 per hour. A recent pay cut caused a favorable labor rate variance of $0.40 per hour. The standard direct labor hours for actual July outputs were 4,600. Read the requirements Requirement 1. Find the actual number of direct labor hours worked during July. First, find the actual direct labor price rate per hour. Then, determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given. Select the formula then calculate the actual price per hour. Options: Direct labor flexible budget variance/Favorable labor rate variance/Std. direct labor hours/Std. direct labor rate per hour = Actual direct labor rate per hour Determine the actual number of direct labor hours worked by setting up the computation of the total direct labor variance as given. (Enter the known amounts, then determine the missing amounts to solve for the actual direct labor hours. Enter the amounts as positive numbers. Label the variance as favorable (F) or unfavorable (U).) Lemke Music Schedule to Compute Actual Direct Labor Hours Flexible budget Flexible Actual for actual output budget variance Direct labor hours Cost per hour Total direct labor cost F/U Flexible budget variance Requirement 2. Compute the direct labor rate and efficiency variances. Do these variances suggest that the manager may have made trade-offs? Explain. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DL = Direct labor.) Begin by determining the formula for the price variance, then compute the price variance for direct labor. Options: Actual hours/Actual rate/Standard hours allowed/Standard rate DL rate variance x F/U Now determine the formula for the efficiency variance, then compute the efficiency variance for direct labor. Options: Actual hours/Actual rate/Standard hours allowed Standard rate ) = DL efficiency variance x( 11 x x II F/U Do these variances suggest that the manager may have made trade-offs? Explain. Favorable/Unfavorable Favorable/Unfavorable The direct labor rate variance combined with the direct labor efficiency variance suggests that the manager may have used workers. However, due to the overall net effect, it appears there was Higher-paid and more efficient/Lower-paid and less-efficient A reasonable trade-off/No trade-off
