EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

Question

5,600 hours ($12.00 per hour – $12.50 per hour) = $2,800 F Labor efficiency variance = SR (AH – SH) $12.50 per hour (5,600 hours – 5,250 hours) = $4,375 U b. No, the new labor mix probably should not be continued. Although it decreases the average hourly labor cost from $12.50 to $12.00, thereby causing a $2,800 favorable labor rate variance, this savings is more than offset by a large unfavorable labor efficiency variance for the month. Thus, the new labor mix increases overall labor costs. Problem 10-17 (continued) Actual Hours of

Answer

5,600 hours ($12.00 per hour – $12.50 per hour) = $2,800 F Labor efficiency variance = SR (AH – SH) $12.50 per hour (5,600 hours – 5,250 hours) = $4,375 U b. No, the new labor mix probably should not be continued. Although it decreases the average hourly labor cost from $12.50 to $12.00, thereby causing a $2,800 favorable labor rate variance, this savings is more than offset by a large unfavorable labor efficiency variance for the month. Thus, the new labor mix increases overall labor costs. Problem 10-17 (continued) Actual Hours of

EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

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