E24.6 Marlo Enterprises
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Marlo Enterprises produces radon mitigation pumps. Information pertaining to the company's
monthly direct labor usage is provided below:
Standard labor rate per hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16
Standard hours allowed per radon mitigation pump . . . . . . . . . . . . . . . . . . . . . . . 0.5 hours
Actual pumps produced during the current month . . . . . . . . . . . . . . . . . . . . . . . . 9,000 units
Actual labor hours worked during the current month . . . . . . . . . . . . . . . . . . . . . . 3,600 hours
Actual labor cost for the current month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64,800
a. Compute the company's labor rate variance.
b. Compute the company's labor efficiency variance.
c. An extremely large order of radon mitigation pumps was filled during the month for exportation
to Saudi Arabia. Filling this order resulted in extended hours for many of the company's workers.
Which labor variance reflects the extra hours worked by Marlo's employees? Was their time
well utilized? Explain.
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Solution Summary
The expert calculates the labor rate variance and efficiency variance as well as interpreting the result. The company's labor rate variances are computed.
Solution Preview
a.
Actual Labor Rate = $64800/3600hrs= $18/hr
Company's labor rate variance
=(Actual rate - Standard rate) x Actual hours worked = ...
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