Acc400 Accounting for Decision Making: E24.6 Marlo Enterprises produces radon mitigation pumps

Acc400 Accounting for Decision Making

Exercise 24.6 Computing Labor Cost Variances
Marlo Enterprises produces radon mitigation pumps. Information pertaining to the company's monthly direct labor usage is provided below:
Standard labor rate per hour $16
Standard hours allowed per radon mitigation pump 0.50
Actual pumps produced during the current month 9,000
Actual labor hours worked during the current month 3,600
Actual labor cost for the current month $64,800

Actual labor rate per hour $18
Standard hours allowed for actual production 4,500
Actual hours used per radon mitigation pump 0.40

a. Compute the company's labor rate variance.
b. Compute the company's labor efficiency variance.
c. An extremely large order of radon mitigation pumps was filled during the month for exportation to Saudi Arabia. Filling this order resulted in extended hours for many of the company's workers. Which labor variance reflects the extra hours worked by Marlo's employees? Was their time well utilized? Explain.
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