© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Hanson Inc. has the following direct labor standard to manufacture one Zippy:
1.5 standard hours per Zippy at 6.00 per direct labor hour
Last week 1,550 direct labor hours were worked at a total labor cost of 9,610 to
make 1,000 Zippies.
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
What was Hanson’s actual rate AR for labor for the week?
a. 6.20 per hour. b. 6.00 per hour.
c. 5.80 per hour. d. 5.60 per hour.
What was Hanson’s actual
rate AR for labor for the week?
a. 6.20 per hour. b. 6.00 per hour.
c. 5.80 per hour. d. 5.60 per hour.
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
What was Hanson’s actual rate AR for labor for the week?
a. 6.20 per hour. b. 6.00 per hour.
c. 5.80 per hour. d. 5.60 per hour.
What was Hanson’s actual
rate AR for labor for the week?
a. 6.20 per hour.
b. 6.00 per hour. c. 5.80 per hour.
d. 5.60 per hour.
AR = 9,610 ÷ 1,550 hours AR = 6.20 per hour
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Hanson’s labor rate variance LRV for the week was:
a. 310 unfavorable. b. 310 favorable.
c. 300 unfavorable. d. 300 favorable.
Hanson’s labor rate variance LRV for the week was:
a. 310 unfavorable. b. 310 favorable.
c. 300 unfavorable. d. 300 favorable.
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Hanson’s labor rate variance LRV for the week was:
a. 310 unfavorable. b. 310 favorable.
c. 300 unfavorable. d. 300 favorable.
Hanson’s labor rate variance LRV for the week was:
a. 310 unfavorable.
b. 310 favorable. c. 300 unfavorable.
d. 300 favorable.
LRV = AHAR - SR LRV = 1,550 hrs6.20 - 6.00
LRV = 310 unfavorable
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
The standard hours SH of labor that should have been worked to produce
1,000 Zippies is: a. 1,550 hours.
b. 1,500 hours. c. 1,700 hours.
d. 1,800 hours. The
standard hours SH of labor that
should have been worked to produce 1,000 Zippies is:
a. 1,550 hours. b. 1,500 hours.
c. 1,700 hours. d. 1,800 hours.
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
The standard hours SH of labor that should have been worked to produce
1,000 Zippies is: a. 1,550 hours.
b. 1,500 hours. c. 1,700 hours.
d. 1,800 hours. The
standard hours SH of labor that
should have been worked to produce 1,000 Zippies is:
a. 1,550 hours.
b. 1,500 hours.
c. 1,700 hours. d. 1,800 hours.
SH = 1,000 units × 1.5 hours per unit SH = 1,500 hours
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Hanson’s labor efficiency variance LEV for the week was:
a. 290 unfavorable. b. 290 favorable.
c. 300 unfavorable. d. 300 favorable.
Hanson’s labor efficiency variance LEV for the week was:
a. 290 unfavorable. b. 290 favorable.
c. 300 unfavorable. d. 300 favorable.
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Hanson’s labor efficiency variance LEV for the week was:
a. 290 unfavorable. b. 290 favorable.
c. 300 unfavorable. d. 300 favorable.
Hanson’s labor efficiency variance LEV for the week was:
a. 290 unfavorable. b. 290 favorable.
c. 300 unfavorable.
d. 300 favorable.
LEV = SRAH - SH LEV = 6.001,550 hrs - 1,500 hrs
LEV = 300 unfavorable
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Actual Hours Actual Hours Standard Hours × × ×
Actual Rate Standard Rate Standard Rate
Rate variance 310 unfavorable
Efficiency variance 300 unfavorable
1,550 hours 1,550 hours 1,500 hours × × ×
6.20 per hour 6.00 per hour 6.00 per hour
= 9,610 = 9,300 = 9,000
Zippy
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
A Closer Look
High skill, high rate
Low skill, low rate
Using highly paid skilled workers to perform unskilled tasks results in an
unfavorable rate variance.
Production managers who make work assignments are generally responsible for rate variances.
Production managers who make work assignments are generally responsible for rate variances.
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
A Closer Look
Unfavorable Efficiency
Variance
Poorly trained
workers Poor
quality materials
Poorly maintained
equipment Poor
supervision of workers
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
I am not responsible for the unfavorable labor
efficiency variance You purchased cheap
material, so it took more time to process it.
You used too much time because of poorly
trained workers and poor supervision.
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Maybe I can attribute the labor and material variances to personnel
for hiring the wrong people and training them poorly.
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Now let’s calculate standard cost
variances for the last of the variable
production costs – variable
manufacturing overhead
.
© The McGraw-Hill Companies, Inc., 2000
IrwinMcGraw-Hill
Hanson Inc. has the following variable manufacturing overhead standard to
manufacture one Zippy:
1.5 standard hours per Zippy at 3.00 per direct labor hour
