Montecino Corporation uses two different types of labor to manufacture its product. The types of labor, Cutting and Setup, have the following standards: During July, the following actual production information was provided:
What is the Labor mix variance?

Question

Montecino Corporation uses two different types of labor to manufacture its product. The types of labor, Cutting and Setup, have the following standards:  During July, the following actual production information was provided:
 What is the Labor mix variance?

Quizplus · Accepted Answer

To calculate the labor mix variance, we need to first calculate the standard hours for each labor type based on the actual output.

Standard hours for Cutting labor = (3000 units × 0.15 hours per unit) = 450 hours 
Standard hours for Setup labor = (3000 units × 0.05 hours per unit) = 150 hours

Now, we need to find the difference between the actual labor hours used and the standard hours for each labor type, and multiply that difference by the standard rate per hour for that labor type.

Labor mix variance = (Actual Setup hours – Standard Setup hours) × Standard Setup rate + (Actual Cutting hours – Standard Cutting hours) × Standard Cutting rate 
Labor mix variance = (70 – 150) × $20 + (880 – 450) × $8 
Labor mix variance = -$1600 + $3440 
Labor mix variance = $1840

Therefore, the labor mix variance is $1,840(F), which means that the actual mix of labor used was more efficient than the standard mix.

Option C is the correct answer.

Montecino Corporation Uses Two Different Types of Labor to Manufacture