Question

the standards for the new galaxy phone specify 4.1 direct labor-hours per unit at $12.10 per direct labor-hour. last month 1,600 units of the new galaxy phone were produced using 6,600 direct labor-hours at a total direct labor wage cost of $77,220. required: a. What was the labor rate variance for the month? b. what was the labor efficiency variance for the month?

Answer 1

a.The labor rate variance for the month $2,640 (Favorable).

b.The labor efficiency variance for the month $484 (Unfavorable).

Solution:

The following is a calculation of labor rate variation and labor efficiency variance:

Variation in labor rates = Actual cost - (Actual hours x Standard rate)

= $77,220 - (6,600 × $12.10)

= $77,220 - 79,860

= $2,640 Favorable

Variation in labor efficiency = Standard rate (Actual hours - Standard hours)

= $12.10 × (6,600 - 1,600 × 4.1)

= $12.10 × 40

= $484 Unfavorable

Direct Labor:

Direct labor (DL) expenses in accounting are the costs connected with paying people to produce a product or perform a service. Workers must be explicitly involved in the production or delivery of the product or service. One of the costs associated with manufacturing a product or delivering a service is direct labor expenditures. Furthermore, direct labor costs differ from indirect labor expenses.

The following are some examples of direct labor costs:

1.Wages paid to assembly line workers in a manufacturing context.

2.Wages given to restaurant kitchen staff in a service setting.

Learn more about labor-hours:

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