Javon Company set standards of 2 hours of direct labor per unit at a rate of $16.30 per hour. During October, the company actually uses 13,200 hours of direct labor at a $217,800 total cost to produce 6,900 units. In November, the company uses 17,200 hours of direct labor at a $284,660 total cost to produce 7,300 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor variance for each of these two months. (2) Javon investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Javon Company set standards of 2 hours of direct labor per unit at a rate of $16.30 per hour. During October, the company actually uses 13,200 hours of direct labor at a $217,800 total cost to produce 6,900 units. In November, the company uses 17,200 hours of direct labor at a $284,660 total cost to produce 7,300 units of product.
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
(1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor variance for each of these two months.
(2) Javon investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?
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