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Unformatted text preview: MGMT 201 (Ganguly) MGMT 201 (Ganguly) Lecture 24: More about Variances Lecture 24: More about Variances (Chapter 10 continued, Chapter (Chapter 10 continued, Chapter 11 introduced) 11 introduced) In the last lecture, we looked In the last lecture, we looked at Material Cost variances and at Material Cost variances and “teed up” it’s relationship with “teed up” it’s relationship with Labor Cost variances… Labor Cost variances… In this lecture we’ll look at Labor Cost In this lecture we’ll look at Labor Cost Variances more specifically and then Variances more specifically and then move on! move on! 3 Standard Costs Standard Costs So let’s calculate standard cost variances for direct labor . 4 Hanson Inc. has the following direct labor standard to manufacture one Zippy: 1.5 standard hours per Zippy at $10.00 per direct labor hour Last week 1,550 direct labor hours were worked at a total labor cost of $15,810 to make 1,000 Zippies. Labor Variances Labor Variances Zippy 5 What was Hanson’s actual rate (AR) for labor for the week? a. $10.20 per hour. b. $10.10 per hour. c. $9.90 per hour. d. $9.80 per hour. Labor Variances Labor Variances Zippy 6 Hanson’s labor rate variance (LRV) for the week was: a. $310 unfavorable. b. $310 favorable. c. $300 unfavorable. d. $300 favorable. Labor Variances Labor Variances Zippy 7 The standard hours (SH) of labor that should have been worked to produce 1,000 Zippies is: a. 1,550 hours. b. 1,500 hours. c. 1,700 hours. d. 1,800 hours. Labor Variances Labor Variances Zippy 8 Hanson’s labor efficiency variance (LEV) for the week was: a. $510 unfavorable. b. $510 favorable. c. $500 unfavorable. d. $500 favorable. Labor Variances Labor Variances Zippy 9 Actual Hours Actual Hours Standard Hours × × × Actual Rate Standard Rate Standard Rate Labor Variances Summary Labor Variances Summary Rate variance $310 unfavorable Efficiency variance $500 unfavorable 1,550 hours 1,550 hours 1,500 hours × × × $10.20 per hour $10.00 per hour $10.00 per hour $15,810 $15,500 $15,000 10 10 Labor Rate Variance – Labor Rate Variance – A Closer Look A Closer Look High skill, high rate Low skill, low rate Using highly paid skilled workers to perform unskilled tasks results in an unfavorable rate variance....
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 Spring '08
 ROWE
 Cost Accounting, variances

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