Reference no: EM131806502

Problem - Kwikeze Company set the following standard costs for one unit of its product.

Direct materials ((3.0 Ibs. @ $4.0 per Ib.) $ 12.00

Direct labor (1.9 hrs. @ $13.0 per hr.) 24.70

Overhead (1.9 hrs. @ $18.50 per hr.) 35.15

Total standard cost $ 71.85

The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% level.

Overhead Budget (75% Capacity)

Variable overhead costs

Indirect materials $ 15,000

Indirect labor 75,000

Power 15,000

Repairs and maintenance 30,000

Total variable overhead costs $ 135,000

Fixed overhead costs

Depreciation-building 25,000

Depreciation-machinery 72,000

Taxes and insurance 19,000

Supervision 276,250

Total fixed overhead costs 392,250

Total overhead costs $ 527,250

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (46,500 Ibs. @ $4.20 per lb.) $ 195,300

Direct labor (30,000 hrs. @ $13.20 per hr.) 396,000

Overhead costs

Indirect materials $ 45,750

Indirect labor 177,500

Power 17,250

Repairs and maintenance 34,500

Depreciation-building 25,000

Depreciation-machinery 97,200

Taxes and insurance 17,100

Supervision 276,250 690,550

Total costs $ 1,281,850

Required - Compute the direct labor cost variance, including its rate and efficiency variances.