Question

Coronado Family Instruments makes cellos. During the past year, the company made 6,370 cellos even though the budget planned for only 5,500. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.
Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Production= 6,370 cellos

The Budget production= 5,500.

The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate.

The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (4*6,370 - 25,000)*14

Direct labor time (efficiency) variance= $6,720 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (14 - 15)*25,000

Direct labor rate variance= $25,000 unfavorable