70.2K

Verified Solution

Link Copied!

Matthews & Bros. is a local landscape construction company. In analyzing financial performance, the cost accountant compares actual results with a flexible budget. The standard direct labor rates used in the flexible budget are established each year at the time the annual plan is formulated and held constant for the entire year.

The standard direct labor rates in effect for the current fiscal year and the standard hours allowed for the actual output of work for July are shown in the following schedule.

Worker ClassificationStandard Direct Labor Rate per HourStandard Direct Labor-Hours Allowed for Output

I$401,500

II352,000

III252,500

The wage rates for each labor class increased under the terms of a new contract. The standard wage rates were not revised to reflect the new contract.

The actual direct labor-hours worked and the actual direct labor rates per hour experienced for the month of July were as follows.

Worker ClassificationActual Direct Labor Rate per Hour Actual Direct Labor-Hours

I$441,660

II382,600

III261,800

Required:

Calculate the dollar amount of the total direct labor variance for July for Matthews & Bros. and break down the total variance into the following components:

a. Direct labor price and efficiency variances.

b. Direct labor mix and yield variances

Answer & Explanation Solved by verified expert

See Answer