The budget for the month of May was for 11,200 units at a direct materials cost of $19 per unit. Direct labor was budgeted at 28 minutes per unit for a total of $100,800. Actual output for the month was 8,900 units with $137,500 in direct materials and $81,775 in direct labor expense. The direct labor standard of 28 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a (n) : (CMA adapted)

Question

Business

Kirsten Mcmahon

7 September, 04:00

The budget for the month of May was for 11,200 units at a direct materials cost of $19 per unit. Direct labor was budgeted at 28 minutes per unit for a total of $100,800. Actual output for the month was 8,900 units with $137,500 in direct materials and $81,775 in direct labor expense. The direct labor standard of 28 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a (n) : (CMA adapted)

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Willie Harding · Answer 1

Direct labor price (rate) variance = $1,675 (unfavorable)

Direct labor efficiency variance = 0

Explanation:

As per the data given in the question,

Number of units = 11,200

cost = $19 per unit

Labor budgeted = at 28 minutes per unit

Total budget = $100,800

Actual output = 8,900 units

Direct material expense = $137,500

Direct labor expense = $81,775

As per the following formula,

Direct labor price variance = (Actual price - Standard price) * Actual hour

= ($81,775 : 8900 * 2 - $100,800 : 11,200 * 2) * 8,900 : 2

= $1,675 (unfavorable)

Direct labor efficiency variance = (Actual hour - Standard hour) * Standard price

= (8,900 * 28 : 60 - 8,900 * 28 : 60) * $100,800 : 11,200 * 2

= 0