Question

Embouchure LLC is a manufacturer of mouth pieces for wind instruments. At the beginning of April, it was estimated that the 18k flute headjoint would require 6 hours of direct labor and the related unit cost for direct labor to be $60.00. Through the month of April, the company incurred 11,400 actual labor hours to produce 2,000 18k flute headjoints. Direct laborers were paid at a rate of $10.30 per hour. Which of the following statements is correct with regard to the 18k flute headjoint production in April?

A. The unfavorable rate variance tells us that the actual purchase price of direct materials was greater than the estimated purchase price.
B. It is likely that the rate and efficiency variances are unrelated as to why they are occurring because they are both favorable variances.
C. If the company paid higher wages to acquire more efficient and skilled workers in the production of headjoints, it was worth it.
D. The standard direct labor rate was greater than the actual labor rate paid during the month
E. The direct labor hours expected for the actual output during the month were less than the actual direct labor hours logged during the month.

Answer 1

Embouchure LLC exceeded its labor efficiency expectations by using 11,400 actual labor hours instead of the estimated 12,000 hours to produce 2,000 18k flute headjoints. This suggests a possible benefit from hiring more efficient workers, even at a higher wage, but without additional productivity and quality data, the overall value of higher wages cannot be fully evaluated.

Step-by-step explanation:

The question requires an analysis of the direct labor hours and costs associated with the production of 18k flute headjoints by Embouchure LLC during the month of April. Initially, it was estimated that each headjoint would require 6 hours of labor at a unit labor cost of $60. However, the actual data shows that the company used 11,400 labor hours to produce 2,000 headjoints, at an hourly wage of $10.30. When calculating the expected labor hours for the actual production, we find it should have been 12,000 hours (2,000 headjoints * 6 hours each). This indicates that the company used fewer labor hours than expected (11,400 actual vs. 12,000 estimated).

If Embouchure LLC had indeed paid higher wages for more efficient and skilled workers, it could be worth the investment if the actual hours used were less than the estimated hours, despite the higher hourly wage, assuming that the quality and productivity were not compromised. Without additional information regarding quality and efficiency outcomes, it is not possible to definitively say if the increased labor cost led to an overall benefit for the company.