Adapted from AY2016 Sem1 B209 ESE
- Oven Fresh Pte Ltd (“Oven Fresh”) creates freshly baked cakes daily.
The table below reports the budgeted information for 300 cakes for the month of July.
| Budgeted Information: | |
| Direct labor hours | 900 hours |
| Direct labor hourly rate | $12 / hour |
Oven Fresh produced a total of 280 cakes in the month of Jul 2021.
| Actual Information: | |
| Direct labor hours incurred | 920 hours |
| Total Direct labor cost | $10,120 |
(a) Calculate the direct labor rate variance and state whether the variance is favorable or unfavorable. Show all your workings clearly.
(b) Calculate the direct labor efficiency variance and state whether the variance is favorable or unfavorable. Show all your workings clearly.
(c) Analyse the total direct labor variance and explain if Oven Fresh is doing well in controlling its labor cost.