915 Solving for Unknowns L02 L03 L04 Levram Company uses a s

9-15 Solving for Unknowns L02, L03, L04 Levram Company uses a standard costing system. During the past quarter, the following variances were computed: Variable overhead efficiency variance 30,000 U 40,000 U Direct labor efficiency variance Direct labor rate variance 25,000 U Levram applies variable overhead using a standard rate of S4 per direct labor hour allowed. Two direct labor hours are allowed per unit produced. (Only one type of prod- uct is manufactured.) During the quarter, Levram used 15 percent more direct labor hours than should have been used Required 1. What were the actual direct labor hours worked? The total hours allowed? 2. What is the standard hourly rate for direct labor? The actual hourly rate? 3. How many actual units were produced?

Solution

Answer 1.

Standard Variable Overhead Rate = $4.00
Standard DL hour = X
Actual DL hour = X + 15%*X = 1.15*X

Variable Overhead Efficiency Variance = (Actual DL hour - Standard DL hour) * Standard Variable Overhead Rate
$30,000 = (1.15*X - X) * $4
7,500 = 0.15 * X
X = 50,000

Standard DL hour = 50,000
Actual DL hour = 1.15 * 50,000
Actual DL hour = 57,500

Answer 2.

DL Efficiency Variance = Standard Rate * (Actual DL hour - Standard DL hour)
$40,000 = Standard Rate * (57,500 - 50,000)
$40,000 = Standard Rate * 7,500
Standard Rate = $5.33

Direct Labor Rate Variance = Actual DL hours *(Actual Rate - Standard Rate)
$25,000 = 57,500 * (Actual Rate - $5.33)
$0.43 = Actual Rate - $5.33
Actual Rate = $5.76

Answer 3.

Standard DL hours allowed per unit = 2
Standard DL hours = 50,000

Number of units produced = Standard DL hours / Standard DL hours allowed per unit
Number of units produced = 50,000 / 2
Number of units produced = 25,000