EXERCISE 10-15 (CONTINUED) ALTERNATIVE SOLUTION

2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH10 STANDARD COST AND THE BALANCE SCORECARD
2. a. Before the variances can be computed, we must first determine the actual direct labor hours worked for last year. This can be done through the variable overhead efficiency variance, as follows: Variable overhead efficiency variance = SR (AH – SH) $1.30 per hour × (AH – 16,000 hours*) = $650 U $1.30 per hour × AH – $20,800 = $650** $1.30 per hour × AH = $21,450 AH = $21,450 ÷ $1.30 per hour AH = 16,500 hours * 8,000 units × 2.0 hours per unit = 16,000 hours ** When used in the formula, an unfavorable variance is positive. We must also compute the standard rate per direct labor hour. The computation is: Labor rate variance = (AH × AR) – (AH × SR) $79,200 – (16,500 hours × SR) = $3,300 F $79,200 – 16,500 hours × SR = –$3,300*