915 Solving for Unknowns L02 L03 Levram Company uses a stand

9-15 Solving for Unknowns L02, L03, Levram Company uses a standard costing system. During the past quarter, the following 04 variances were computed: Variable overhead efficiency variance Direct labor efficiency variance Direct labor rate variance S 30,000 U 40,000 U 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. Variable Overhead Efficiency Variance = (SH - AH) X SR AH = 115% X SH = 1.15 SH Therefore, -$30,000 = (SH - 1.15 SH) X $4 -$7,500 = -0.15 SH SH = 7,500 / 0.15 SH = 50,000 hrs = Total Hours Allowed AH = 1.15 X 50,000 hrs AH = 57,500 hrs = Actual Direct Labor Hours Answer 2. Direct Labor Efficiency Variance = (SH - AH) X SR Therefore, -40,000 = (50,000 hrs - 57,500 Hrs) X SR -40,000 = -7,500 X SR SR = $40,000 / 7,500 SR = $5.33 per hr. Direct Labor Rate Variance = (SR - AR) X AH Therefore, -25,000 = ($5.33 - AR) X 57,500 hrs -0.43 = $5.33 - AR AR = $5.33 + 0.43 AR = $5.77 per hour Answer 3. Actual Units Prodced = Total Standard Hours / DL hrs per unit Actual Units Prodced = 50,000 hrs / 2 hrs Actual Units Prodced = 25,000 Units