Question:
DIRECT LABOR EFFICIENCY VARIANCE, DIRECT LABOR MIX AND YIELD VARIANCES
Limpio, Inc., also uses two different types of direct labor in producing the cleansing chemical: mixing and drum-filling labor (the completed product is placed into 50-gallon drums). For each batch of 20,000 gallons of direct materials input, the following standards have been developed for direct labor:Limpio, Inc., produces a key ingredient for liquid laundry detergents. Two chemical solutions, Chem A and Chem B, are mixed and heated to produce a cleansing chemical that is sold to companies that produce liquid detergents. The cleansing ingredient is produced in batches and has the following standards:
|
Direct Labor Type
|
Mix
|
SP
|
Standard Cost
|
|
Mixing
|
2,000 hrs.
|
$11.00
|
$22,000
|
|
Drum-filling Yield
|
1,000
|
8.00
|
8,000
|
|
Total
|
3,000 hrs.
|
|
$30,000
|
|
Yield
|
15,000 gallons
|
|
|
The actual direct labor hours used for the output produced in March are also provided:
|
Labor Type
|
Mix
|
|
Mixing
|
18,000 hrs.
|
|
Drum-filling
|
12,000
|
|
Total
|
30,000 hrs.
|
|
Yield
|
158,400 gallons
|
Required:
1. Compute the direct labor mix and yield variances.
2. Compute the total direct labor efficiency variance. Show that the total direct labor efficiency variance is equal to the sum of the direct labor mix and yield variances.