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# Labor and Variable Manufacturing Overhead Variances

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Exercise 10-12 Labor and Variable Manufacturing Overhead Variances [LO3, LO4]
Hollowell Audio, Inc. , manufactures military-specification compact discs. The company uses standards to control its costs. The labor standards that have been set for one disc are as follows:

Standard
Hours Standard Rate per Hour Standard Cost
24 minutes \$ 6.00 \$ 2.40
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During July, 8,500 hours of direct labor time were recorded to make 20,000 discs. The direct labor cost totaled \$49,300 for the month.

Requirement 1:
(a) What direct labor cost should have been incurred to make the 20,000 discs? (Omit the "\$" sign in your response.)

Standard direct labor cost \$

(b) By how much does this differ from the cost that was incurred? (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "\$" sign in your response.)

Total variance \$

Requirement 2:
Break down the difference in cost from requirement 1 above into a labor rate variance and a labor efficiency variance. (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "\$" sign in your response.)

Labor rate variance \$

Labor efficiency variance \$

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Requirement 3:
The budgeted variable manufacturing overhead rate is \$4 per direct labor-hour. During July, the company incurred \$39,100 in variable manufacturing overhead cost. Compute the variable overhead spending and efficiency variances for the month. (Indicate the effect of the variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "\$" sign in your response.)

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Hint 1 | Hint 2

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This solution is comprised of a detailed explanation to answer what direct labor cost should have been incurred to make the 20,000 discs.

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Exercise 10-12 Labor and Variable Manufacturing Overhead Variances [LO3, LO4]
Hollowell Audio, Inc. , manufactures military-specification compact discs. The company uses standards to control its costs. The labor standards that have been set for one disc are as follows:

Standard
Hours Standard Rate per Hour Standard Cost
24 minutes \$ 6.00 \$ 2.40
________________________________________

During July, 8,500 hours of direct labor time were recorded to make 20,000 discs. The direct labor cost totaled \$49,300 for the month.

Requirement 1:
(a) What direct labor cost should have been incurred to make the 20,000 discs? (Omit the "\$" sign in your response.)
20,000 discs x \$2.40 = \$48,000
Standard direct labor cost \$

(b) By how much does ...

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