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Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
Edition 6ISBN: 978-1305103962Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
Edition 6ISBN: 978-1305103962 Exercise 48
Labor Variances
Cinturon Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the following standards for materials and labor:
During the first month of the year, Boise plant produced 92,000 belts. Actual leather purchased was 287,500 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 78,200 hours at $12.50 per hour.
Refer to the information for Cinturon Corporation above.
Required:
1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches.
2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?
Cinturon Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the following standards for materials and labor:
During the first month of the year, Boise plant produced 92,000 belts. Actual leather purchased was 287,500 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 78,200 hours at $12.50 per hour.
Refer to the information for Cinturon Corporation above.
Required:
1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches.
2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complains strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more careful to avoid a belt with cracks and more time is required. Also, even with extra care, many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take?
Explanation
Verified
Verified
Calculation of labor rate and efficiency...
Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger
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