Share
Explore BrainMass

Standard Labor Variance for CPA Firm Audit

A CPA firm estimates that an audit will require the following work:

Type of Auditor Expected Hours Cost per hour Standard Costs
Manager 10 $50 $500
Senior 20 40 800
Staff 40 30 1200
Totals 70 $2500

The actual hours and costs were:

Type of Auditor Actual Hours Actual Cost per hour Actual Costs
Manager 9 $52 $468
Senior 22 38 836
Staff 44 30 1320
Totals 75 $2624

Required:

Calculate the direct labor, wage rate, and labor efficiency variances for each type of auditor and interpret.

Solution Preview

Solution is provided in a separate Excel file attached.

It contains following parts:

Standard cost analysis

Actual cost analysis

Labour Rate of pay variance = Actual hours ( standard rate per hour-Actual rate per hour)

Labour Usage or Efficiency Variance = Standard Rate per hour ( Standard Hours - actual Hours)

Total Labour cost variance = ( ...

Solution Summary

This solution calculates the direct labor, wage rate, and labor efficiency variances for each type of auditor and interprets it.

$2.19