Minmax Co.'s direct labor information for February is as follows:
Direct labor hours worked (AQ) 33,600 Standard direct labor hours for units manufactured (SQ) 35,000 Unfavorable direct labor rate variance$11,760 Total payroll for direct labor$470,400
The total direct labor flexible-budget variance in February, to the nearest dollar, was:
$7,350 favorable
1. AP = Actual direct labor payroll/actual labor hours worked = (AQ × AP)/AQ = $470,400 (given)/33,600 hours (given) = $14.00/hour
2. Direct labor rate variance = (AP ? SP) × AQ
3. $11,760U (given) = ($14 ? SP) × 33,600 hours (given)
4. Therefore, SP = $13.65/hour (Alternatively, SP = ($470,400 ? $11,760)/33,600 = $13.65/hour)
5. Direct labor efficiency variance = (AQ ? SQ) × SP = (33,600 ? 35,000) hours × $13.65/hour = $19,110 favorable.
6. Total direct labor flexible budget variance = direct labor rate variance + direct labor efficiency variance = $11,760U (given) + $19,110F = $7,350F (or, total direct labor flexible-budget variance = Actual direct labor cost ? Flexible budget direct labor cost = $470,400 ? (35,000 × $13.65) = $470,400 ? $477,750 = $7,350F (rounded to the nearest dollar).
Note: the variance is favorable (F) because actual cost ($470,400) < budgeted cost ($477,750).
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