Problem 17-45 Labor Mix and Yield Variances (LO 17-4)

Matthews & Bros. is a local landscape construction company. In analyzing financial performance, the cost accountant compares actual results with a flexible budget. The standard direct labor rates used in the flexible budget are established each year at the time the annual plan is formulated and held constant for the entire year.

The standard direct labor rates in effect for the current fiscal year and the standard hours allowed for the actual output of work for July are shown in the following schedule:

Worker Classification		Standard Direct Labor Rate per Hour				Standard Direct Labor-Hours Allowed for Output
I		$	47			1,680
II			42			2,240
III			32			2,800

The wage rates for each labor class increased under the terms of a new contract. The standard wage rates were not revised to reflect the new contract.

The actual direct labor-hours worked and the actual direct labor rates per hour experienced for the month of July were as follows:

Worker Classification		Actual Direct Labor Rate per Hour				Actual Direct Labor-Hours
I		$	51			1,800
II			45			2,320
III			33			2,890

Required:

Calculate the dollar amount of the total direct labor variance for July for Matthews & Bros. and break down the total variance into the following components:

a. Direct labor price and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Direct labor price variance
Efficiency variance

b. Direct labor mix and yield variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Direct labor mix variance

Yield variance