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Compute the direct labor rate and efficiency variances

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Reference no: EM133086146

Question - The Sterling Company uses a standard cost system in which manufacturing overhead costs are applied to the units of the company's single product on the basis of direct labor-hours (DLHs). The standard cost card for the product follows:

Standard Cost Card-per unit of product: Direct materials, 4 yards at $3.50 per yard $14

Direct labor, 1.5 DLHs at $8 per DLH 12

Variable overhead, 1.5 DLHs at $2 per DLH 3

The following data pertain to last year's activities:

The company manufactured 18,000 units of product during the year. A total of 70,200 yards of material was purchased during the year at a cost of $3.75 per yard. All of this material was used to manufacture the 18,000 units. - The company worked 29,250 direct labor hours during the year at a cost of $7.80 per hour.

Actual variable manufacturing overhead costs were $61,425.

Required -

a. Compute the direct materials price and quantity variances for the year.

b. Compute the direct labor rate and efficiency variances for the year.

c. Compute the variable overhead rate and efficiency variances for the year.

d. Discuss some possible reasons for the direct labor variances that you computed.

Reference no: EM133086146

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