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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Labor Mix and Yield Variances
Davenport Construction Associates 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 remodeling work for September are shown in the following schedule:
Worker Classification | Standard Direct Labor Rate per Hour | Standard Direct Labor-Hours Allowed for Output |
I | $24 | 600 |
II | 21 | 600 |
III | 15 | 600 |
?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 September were as follows:
Worker Classification | Actual Direct Labor Rate per Hour | Actual Direct Labor-Hours |
I | $26 | 660 |
II | 23 | 780 |
III | 15 | 432 |
Required
Calculate the dollar amount of the total direct labor variance for September for Davenport Construction Associates and break down the total variance into the following components:
a. Direct labor price and efficiency variances.
b. Direct labor mix and yield variances.
Verified
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D construction Associates flexible budget and actual results are been given. The total direct labor variance for the month of September for workers graded I, II and III is calculated as under:
The total direct labor variance is the difference between actual labor cost and the standard labor cost.
The actual labor cost for worker graded I, II and III is calculated by multiplying actual direct labor hours taken and the actual direct labor rate per hour.
| Worker’s grade | Actual direct labor hours (A) | Actual labor rate per hr. (B) | Total actual cost (A×B) |
| I | 660 | $26 | $17,160 |
| II | 780 | $23 | $17,940 |
| III | 432 | $15 | $6,480 |
| Total | 1,872 | $41,580 |
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