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ABC Inc
ABC Inc. has the following direct labor standard to manufacture 1 table: 3 hours per table at $15 per hour Last month 2,700 hours of direct labor were used to make 1,000 tables. The labor total cost was $37,800. Required: Fill in the blanks below 1. AR = 37,800 2. SR = Choose... 3. AH Choose... - (labor time for 1,000 tables) 4. SH = Choose... - (labor time for 1,000 tables) 5. Direct Labor Rate Variance (LRV) = Choose... Choose... 6. Direct Labor Efficiency Variance (LEV) =
Expert Solution
Requirements:
1. AR - Actual rate
| $14 |
Actual rate = $37800/2700 hrs = $14
2. SR - Standard rate
| $15 |
It was given.
3. AH - Actual hours
| 2700 hours |
Actual hours is given.
4. SH - Standard hours
| 3000 hours |
Standard hours = 1000 tables × 3 hrs per table = 3000 hrs
5. Direct labor rate variance (LRV)
| $2700 F |
LRV
= (AR - SR) × AH = ($14 - $15) × 2700 hrs = -$1×2700 hrs = -$2700 = $2700 Favourable
6. Direct labor efficiency variance (LEV)
| $4500 F |
LEV
= (AH - SH) × SR = (2700 hrs - 3000 hrs) × $15 = -300 hrs × $15 = -$4500 = $4500 Favourable
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