The Brown Manufacturing Companys costing system has two dire

The Brown Manufacturing Company\'s costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor hours (DLH). At the beginning of

2014 Brown adopted the following standards for its manufacturing costs:

Direct materials

3 lbs. at $4 per lb.

$12.00

Direct manufacturing labor

4 hrs. at $20 per hr.

80.00

Manufacturing overhead:

Variable

$6 per DLH

24.00

Fixed

$7 per DLH

28.00

Standard manufacturing cost per output unit

$144.00

The denominator level for total manufacturing overhead per month in

2014 is 37,000 direct manufacturing labor-hours

Brown\'s flexible budget for January 2014

was based on this denominator level. The records for January indicated the following:

Save Accounting Table...

+

Copy to Clipboard...

+

Direct materials purchased

26,300 lb. at $3.80 per lb.

Direct materials used

23,300 lb.

Direct manufacturing labor

28,400 hrs. at $19.60 per hr.

Total actual manufacturing overhead (variable and fixed)

$500,000

Actual production

7,600 output units

Now complete the table for direct labor.

Now complete the table for direct labor.

...

.

Actual Input Qty.

Actual Costs

x

Flexible

Incurred

Budgeted Price

Budget

Direct Manuf. Labor

Direct materials	3 lbs. at $4 per lb.		$12.00
Direct manufacturing labor	4 hrs. at $20 per hr.		80.00
Manufacturing overhead:
Variable	$6 per DLH		24.00
Fixed	$7 per DLH		28.00
Standard manufacturing cost per output unit			$144.00

Solution

Actual cost Actual Input quantity Flexible Incurred X Budgeted price Budget Direct manufacturing Labor =28400*19.60 =28400/4*80 =7600*80 556640 568000 608000 Based on the above we can find the following variances Labor efficiency variance =608000-568000 40000 Favourable Labor rate variance =568000-556640 11360 Favourable Total 51360 Favourable