3. Award: 20 out of 20.00 points  

Exercise 17-32 (Static) Labor Mix and Yield Variances (LO 17-5)

Matt's Eat 'N Run has two categories of direct labor: unskilled, which costs $10 per hour, and skilled, which costs $20 per hour.
Management has established standards per "equivalent friendly meal," which has been defined as a typical meal consisting of a
hamburger, a drink, and french fries. Standards have been set as follows.

Skilled labor 2 minutes per equivalent meal

Unskilled labor 6 minutes per equivalent meal

For the year, Matt’s sold 180,000 equivalent friendly meals and incurred the following labor costs.

Skilled labor 6,000 hours $ 125,000

Unskilled labor 15,000 hours 240,000

Required:
a. Compute labor price and efficiency variances.
b. Compute labor mix and yield variances.

Complete this question by entering your answers in the tabs below.

Required A Required B

Compute labor price and efficiency variances. (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.)

Skilled Unskilled Total

Labor price variance $ 5,000  U  $ 90,000  U  $ 95,000  U 

Labor efficiency variance $ 0  $ 30,000  F  $ 30,000  F 

 Required A Required B 

References

Worksheet Difficulty: 2 Medium

Exercise 17-32 Learning Objective: 17-05

(Static) Labor Mix Evaluate production
and Yield Variances performance using
(LO 17-5) production mix and yield
variances.

Exercise 17-32 (Static) Labor Mix and Yield Variances (LO 17-5)

Matt's Eat 'N Run has two categories of direct labor: unskilled, which costs $10 per hour, and skilled, which costs $20 per hour.
Management has established standards per "equivalent friendly meal," which has been defined as a typical meal consisting of a
hamburger, a drink, and french fries. Standards have been set as follows.

Skilled labor 2 minutes per equivalent meal

Unskilled labor 6 minutes per equivalent meal

For the year, Matt’s sold 180,000 equivalent friendly meals and incurred the following labor costs.

Skilled labor 6,000 hours $ 125,000

Unskilled labor 15,000 hours 240,000

Required:
a. Compute labor price and efficiency variances.
b. Compute labor mix and yield variances.

Complete this question by entering your answers in the tabs below.

Required A Required B

Compute labor mix and yield variances. (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.)

Skilled Unskilled Total

Labor mix variance $ 15,000 U $ 7,500 F $ 7,500 U
Labor yield variance $ 15,000 F $ 22,500 F $ 37,500 F

 Required A Required B 

 
Explanation:

a.
Skilled:
(AP × AQ) = $125,000
(SP × AQ) = $20 × 6,000 = $120,000
Labor price variance: $120,000 – $125,000 = $5,000 U
Labor efficiency variance: $120,000 – $120,000 = $0 None

Unskilled:
(AP × AQ) = $240,000
(SP × AQ) = $10 × 15,000 = $150,000
Labor price variance: $150,000 – $240,000 = $90,000 U
Labor efficiency variance: $180,000 – $150,000 = $30,000 F

Total
(AP × AQ) = $365,000
(SP × AQ) = $270,000
Labor price variance: $270,000 – $365,000 = $95,000 U
Labor efficiency variance: $300,000 – $270,000 = $30,000 F

b.
Skilled:
(SP × ASQ) = $20 × (0.25 × 21,000) = $20 × 5,250 = $105,000
(SP × SQ) = $20 × (2/60 × 180,000) = $20 × 6,000 = $120,000
Labor mix variance: $105,000 – $120,000 = $15,000 U
Labor yield variance: = $120,000 – $105,000 = $15,000 F

Unskilled:
(SP × ASQ) = $10 × (0.75 × 21,000) = $10 × 15,750 = $157,500
(SP × SQ) = $10 × (6/60 × 180,000) = $10 × 18,000 = $180,000
Labor mix variance: $157,500 – $150,000 = $7,500 F
Labor yield variance: = $180,000 – $157,500 = $22,500 F

Total:
(SP × ASQ) = $262,500
(SP × SQ) = $300,000
Labor mix variance: $262,500 – $270,000 = $7,500 U
Labor yield variance: $300,000 – $262,500 = $37,500 F