Explore BrainMass

Explore BrainMass

    Direct Labor Variances in a Tight Labor Market

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Rich Ventura operates a commercial painting business in Sacramento, which has a very tight labor market. Much of his work focuses on newly constructed apartments and townhouses.

    The following data relate to crew no. 5 for a recently concluded period when 85 apartment units were painted.

    - Three new employees were assigned to crew no. 5. Wages averaged $18.80 per hour for each employee; the crew took 2,550 hours to complete the work.

    - Based on his knowledge of the operation, articles in trade journals, and conversations with other painters, Ventura established the following standards.
    Typical hourly wage rate of crew personnel $15
    Anticipated crew time for each unit 34 hours

    - The paint quantity variance was $6,070F
    - The operation did not go as smoothly as planned, with customer complaints and problems being much higher than expected.

    1. Compute Ventura's direct labor variances.
    2. Is the direct labor rate variance consistent with what you might expect in a tight labor market? Explain.
    3. What has likely happened that would give rise to customer complaints?

    © BrainMass Inc. brainmass.com March 4, 2021, 5:45 pm ad1c9bdddf
    https://brainmass.com/business/labour-management-and-relations/direct-labor-variances-in-a-tight-labor-market-9722

    Solution Preview

    Price variance = (Actual price of input - Budgeted price of input) à? Actual quantity of input.
    <br>Efficiency variance = (Actual quantity of input used - Budgeted quantity of input allowed for actual output units achieved à? Budgeted ...

    Solution Summary

    This solution looks at direct labor variances for a commercial painting business operating in a tight labor market.

    $2.49

    ADVERTISEMENT