Chapter 11, Problem 11.29AE

Data Set for E11-28A through E11-32A

Country Designs is a manufacturer of large flower pots for urban settings. The company has these standards:

Direct materials (resin)	13 pounds per pot at a cost of $4.00 per pound
Direct labor	4.0 hours at a cost of $17.00 per hour
Standard variable manufacturing overhead rate	$7.00 per direct labor hour
Budgeted fixed manufacturing overhead	$50,000
Standard fixed MOH rate	$10.00 per direct labor hour (DLH)

Country Designs allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of 1,300 flower pots:

Direct materials	Purchased 18,510 pounds at a cost of $4.50 per pound; used 17,810 pounds to produce 1,300 pots
Direct labor	Worked 4.5 hours per flower pot (5,850 total DLH) at a cost of $16.00 per hour
Actual variable manufacturing overhead	$7.20 per direct labor hour for total actual variable manufacturing overhead of $42,120
Actual fixed manufacturing overhead	$49,500
Standard fixed manufacturing overhead allocated based on actual production	$52,000

E11-29A Calculate and interpret direct labor variances (Learning Objective 3)

Refer to the Country Designs data set.

Requirements

1. 1. Compute the direct labor rate variance and the direct labor efficiency variance.
2. 2. What is the total variance for direct labor?
3. 3. Who is generally responsible for each variance?
4. 4. Interpret the variances.