EX.10.47.ALGO - Labor Variances Cinturan Corporation...

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Unformatted text preview: Labor Variances Cinturan Corporation produces high- quality leather belts . The company's plant in Boise uses a standard costing system and has set the Following standards for materials and labor ! Leather (3 strips [ $ 4 ) $ 12.00 Direct labor ( 0. 75 hr . [ $ 12 ) 9. 00 Total prime cost $ 21. 00 During the First month of the year , the Boise plant produced 92, 000 belts . Actual leather purchased was 287, 500 strips at $ 4. 20 per strip . There were no beginning or ending inventories of leather . Actual direct labor was 78 , 300 hours at $ 15.00 per hour Required . 1 . Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula* approaches $ 23:4, 900| A Rate Variance Unfavorable #` Efficiency Variance* $ 11 1 , 600\\ V Unfavorable !` Total Variance* $| 3:46, 500| Unfavorable #` 2. CONCEPTUAL CONNECTION AS Part of the investigation of the unfavorable variances , the plant manager interviews the production manager . The production manager complains strongly about the quality of the leather strips . He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required . Also , even with extra care , many belts have to be discarded and new ones produced to replace the rejects . This replacement work has also produced some overtime demands . What corrective action should the plant manager take ?" 1 . Return to suppliers that provide the quality corresponding to the price standard . 2 . Employ more skilled labor at a cost lesser than the savings made by buying cheap material and improve the product quality . 3 . There is no need to change anything . The sales are not affected by this low quality of raw material . 1...
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  • Winter '15
  • production manager, plant manager

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