Records at the Farnsworth Corporation contained the following data for the most recent period of activity:
Actual total direct labor cost	$ 489,500
Actual direct labor-hours worked	15,200
Standard direct labor-hours allowed for actual output (flexible budget)	14,400
Direct labor price variance	$46,300 F
Actual variable overhead	$ 348,300
Standard variable overhead rate per standard direct labor-hour	$ 21
Variable overhead is applied based on standard direct labor-hours allowed.

Required:
Compute the labor and variable overhead price and efficiency variances.
Note: Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.


We will compute the required variances step by step:

### Given Data:
- **Actual total direct labor cost** = $489,500
- **Actual direct labor-hours worked** = 15,200 hours
- **Standard direct labor-hours allowed for actual output** = 14,400 hours
- **Direct labor price variance** = $46,300 F
- **Actual variable overhead** = $348,300
- **Standard variable overhead rate per standard direct labor-hour** = $21

---

### **1. Direct Labor Efficiency Variance:**
The formula for the **Labor Efficiency Variance** is:

\[
\text{Labor Efficiency Variance} = \text{(Standard hours allowed - Actual hours worked)} \times \text{Standard labor rate per hour}
\]

From the Direct Labor Price Variance calculation:
\[
\text{Labor Price Variance} = (\text{Standard labor rate - Actual labor rate}) \times \text{Actual hours worked}
\]

Rearranging for the **Standard labor rate**:

\[
\text{Standard labor rate} = \frac{\text{Actual total labor cost} - (\text{Direct labor price variance})}{\text{Actual hours worked}}
\]

Substituting values:
\[
\text{Standard labor rate} = \frac{489,500 - 46,300}{15,200} = \frac{443,200}{15,200} = 29.15 \, \text{\$/hour}
\]

Now, substitute this into the **Labor Efficiency Variance formula**:
\[
\text{Labor Efficiency Variance} = (14,400 - 15,200) \times 29.15
\]

\[
\text{Labor Efficiency Variance} = (-800) \times 29.15 = -23,320 \, \text{(U)}
\]

---

### **2. Variable Overhead Price (Spending) Variance:**
The formula for the **Variable Overhead Price Variance** is:

\[
\text{Variable Overhead Price Variance} = \text{(Actual Variable Overhead - Applied Variable Overhead)}
\]

To find the **Applied Variable Overhead**:
\[
\text{Applied Variable Overhead} = \text{Standard variable overhead rate} \times \text{Standard hours allowed}
\]

Substituting values:
\[
\text{Applied Variable Overhead} = 21 \times 14,400 = 302,400
\]

Now, calculate the variance:
\[
\text{Variable Overhead Price Variance} = 348,300 - 302,400 = 45,900 \, \text{(U)}
\]

---

### **3. Variable Overhead Efficiency Variance:**
The formula for the **Variable Overhead Efficiency Variance** is:

\[
\text{Variable Overhead Efficiency Variance} = \text{(Standard hours allowed - Actual hours worked)} \times \text{Standard variable overhead rate}
\]

Substitute the values:
\[
\text{Variable Overhead Efficiency Variance} = (14,400 - 15,200) \times 21
\]

\[
\text{Variable Overhead Efficiency Variance} = (-800) \times 21 = -16,800 \, \text{(U)}
\]

---

### **Summary of Variances:**

1. **Labor Efficiency Variance** = **$23,320 U**
2. **Variable Overhead Price Variance** = **$45,900 U**
3. **Variable Overhead Efficiency Variance** = **$16,800 U**

Let me know if you need further clarification or calculations.

Records at the Farnsworth Corporation contained the following data for the most recent period of activity: Actual total direct labor cost $489,500, Actual direct labor-hours worked 15,200, Standard direct labor-hours allowed for actual output (flexible budget) 14,400, Direct labor price variance $46,300 F, Actual variable overhead $348,300, Standard variable overhead rate per standard direct labor-hour $21. Variable overhead is applied based on standard direct labor-hours allowed. Required: Compute the labor and variable overhead price and efficiency variances.

Learn how to compute direct labor and variable overhead price and efficiency variances with a step-by-step example based on the Farnsworth Corporation's data. This problem involves concepts in cost accounting, variance analysis, and labor cost management, suitable for college-level business and accounting students.

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