The following information was compiled by Wildhorse Company: Expected volume of production 110,000 units Actual level of production 105,000 units Budgeted fixed...

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Accounting

The following information was compiled by Wildhorse Company:
Expected volume of production 110,000 units
Actual level of production 105,000 units
Budgeted fixed overhead $220,000
Actual fixed overhead $228,150
Variable overhead rate per direct-labour hour $8
Actual variable overhead $406,000
Standard direct-labour hours allowed per unit produced 0.5 hour
Standard direct-labour rate per hour $8.05
Actual direct-labour hours of input 52,400 hours
Actual direct-labour rate per hour $8.10

Compute the following variances:
Direct-labour flexible-budget variance $______(Favourable/Unfavourable/neither)

Answer & Explanation Solved by verified expert

3.8 Ratings (716 Votes)

Standard direct labour hours per unit	0.50
Number of actual production units	105,000.00

Standard labour hours (105000 x 0.5)	52,500.00

Standard direct labour hour rate per hour	8.05

Standard direct labour cost should have been (52500 x 8.05)	$422,625.00


Actual direct labour hours used	52,400.00
Actual direct labour hour rate	8.10

Actual cost of labour (52400 x 8.10)	$424,440.00

Direct labour hour flexible budget variance (424,440 – 422,625)	$1,815.00 (U)

Thus, the actual direct labour flexible budget variance is $1,515.00 and it is unfavourable as the cost of direct labour is higher than the standard labour cost.

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Expected volume of production	110,000	units
Actual level of production	105,000	units
Budgeted fixed overhead	$220,000
Actual fixed overhead	$228,150
Variable overhead rate per direct-labour hour	$8
Actual variable overhead	$406,000
Standard direct-labour hours allowed per unit produced	0.5	hour
Standard direct-labour rate per hour	$8.05
Actual direct-labour hours of input	52,400	hours
Actual direct-labour rate per hour	$8.10