The Standards for Product V33I Specify 8

question 34

Essay

The standards for product V33I specify 8.0 direct labor-hours per unit at $11.20 per direct labor-hour. Last month 760 units of product V33I were produced using 6,500 direct labor-hours at a total direct labor wage cost of $75,075.
Required:
a. What was the labor rate variance for the month?
b. What was the labor efficiency variance for the month?
c. Prepare a journal entry to record direct labor costs during the month, including the direct labor variances.

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Definitions:

Unit Product Cost

The total cost (both fixed and variable) to produce a unit of product, used for setting prices and analyzing efficiency.

Absorption Costing

An accounting method where all manufacturing costs, including both variable and fixed costs, are allocated to produced units, thus ‘absorbing’ them.

Unit Product Cost

The total cost associated with producing a single unit of a product, calculated by dividing the total production costs by the number of units produced.

Net Operating Income

A measure of a company's profitability calculated by subtracting operating expenses from operating revenues, excluding non-operating income and expenses.