Coronado Family Instruments makes cellos. During the past year, the company made 6,370 cellos even though the budget planned for only 5,500. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.
Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-06-04T02:13:27+02:00

Answer:

Instructions are below.

Explanation:

Giving the following information:

Production= 6,370 cellos

The Budget production= 5,500.

The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate.

The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (4*6,370 - 25,000)*14

Direct labor time (efficiency) variance= $6,720 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (14 - 15)*25,000

Direct labor rate variance= $25,000 unfavorable