Question
The director of cost management for Portland Instrument Corporation compares each months actual results with a monthly plan. The standard direct-labor rates for the year
The director of cost management for Portland Instrument Corporation compares each months actual results with a monthly plan. The standard direct-labor rates for the year just ended and the standard hours allowed, given the actual output in April, are shown in the following schedule.
Standard Direct-Labor Rate per Hour | Standard Direct-Labor Hours Allowed, Given April Output | |
---|---|---|
Labor class III | $ 24.30 | 1,300 |
Labor class II | 21.30 | 1,300 |
Labor class I | 15.30 | 1,300 |
A new union contract negotiated in March resulted in actual wage rates that differed from the standard rates. The actual direct-labor hours worked and the actual direct-labor rates per hour experienced for the month of April were as follows:
Actual Direct-Labor Rate per Hour | Actual Direct- Labor Hours | |
---|---|---|
Labor class III | $ 26.10 | 1,400 |
Labor class II | 22.80 | 1,600 |
Labor class I | 16.50 | 1,050 |
Required:
1-a. Compute the direct-labor rate variance for each labor class for the month of April.
1-b. Compute the direct-labor efficiency variance for each labor class for the month of April.
2. Which of the following could be considered an advantage of using a standard-costing system in which the standard direct-labor rates are not changed during the year to reflect such events as a new labor contract?
\begin{tabular}{|c|c|c|} \hline Labor Class & \\ \hline III \\ \hline II \\ \hline Total & \\ \hline I & \\ \hline \end{tabular} \begin{tabular}{|c|c|} \hline Labor Class \\ \hline III \\ \hline II \\ \hline I \\ \hline Total \\ \hline \end{tabular}
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