During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour.

If the direct
labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be

$10.40

SUPPORTING CALCULATIONS: 10,000 × $10 = $100,000 $100,000 + $4,000 = $104,000 $104,000/10,000

= $10.40

Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for
materials and direct labor for the 100 units of Product AA are as follows: Materials: Standard Actual
Standard: 200 pounds at $3.00 per pound $600 Actual: 220 pounds at $2.85 per pound $627 Direct
labor: Standard: 400 hours at $15.00 per hour $6,000 Actual: 368 hours at $16.50 per hour $6,072 What
is the labor efficiency variance for Bodacious Corporation?

$480 (F)

SUPPORTING CALCULATIONS: (368 − 400) × $15 = $480 (F)

As a general rule, an investigation of a variance should be undertaken only if the

anticipated benefits are greater than the expected costs

Which of the following factors would cause an unfavorable material quantity variance?

using poorly maintained machinery

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the
driver used to assign overhead costs to products. Direct materials: 10 pounds × $3 per pound Direct
labor: 2.5 hours × $8 per hour Variable manufacturing overhead: 2.5 hours × $2 per hour The following
activity occurred during the month of June: Materials purchased: 125,000 pounds at $2.60 per pound
Materials used: 110,000 pounds Units produced: 10,000 units Direct labor: 24,000 hours at $7.50 per
hour Actual variable manufacturing overhead: $51,000 The company records materials price variances
at the time of purchase. The direct labor efficiency variance is

$8,000

SUPPORTING CALCULATIONS: (24,000 × $8) − (10,000 × 2.5 × $8) = $8,000 favorable

Colina Production Company uses a standard costing system. The following information pertains to the
current year. Direct labor hours is the driver used to assign overhead costs to products. Actual
production 5,500 units Actual factory overhead costs ($16,500 is fixed) $40,125 Actual direct labor costs
(11,250 hours) $131,625 Standard direct labor for 5,500 units: Standard hours allowed 11,000 hours
Labor rate $12.00 The factory overhead rate is based on an activity level of 10,000 direct labor hours.
Standard cost data for 5,000 units is as follows: Variable factory overhead $22,500 Fixed factory
overhead 13,500 Total factory overhead $36,000 What is the variable overhead efficiency variance for
Colina Production Company?

562.50

SUPPORTING CALCULATIONS: (11,250 − 11,000) × ($22,500 / 10,000) = $562.50 (U)