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# Standard Labor Variance for CPA Firm Audit

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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