Question

otal Labor Variance Tico Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.01 hours. During the month of April, 510,000 bottles were produced using 13,000 labor hours @ $9.00. The standard wage rate is $7.50 per hour. Required: Calculate the total variance for production labor for the month of April. Enter amounts as positive numbers. If required, round your answer to the nearest cent.

Answer 1

Answer:

$78,750 unfavorable

Explanation:

Total labor variance can be divided into direct labor efficiency variance and the direct labor rate variance

Direct labor efficiency variance (DLEV):

DLEV = (Expected labor hours - actual labor hours)*standard rate

$DLEV=(0.01*510,000 - 13,000)*7,50\\DLEV = -59,250$

Direct labor rate variance (DLRV):

DLRV = Actual labor hours * (Standard Rate - Actual Rate)

$DLRV = 13,000*(7.50 - 9.00)\\DLRV = -19,500$

Since both values are negative, they are both unfavorable and the total labor variance (TLV) is given by:

$DLRV = 13,000*(7.50 - 9.00)\\DLRV = 59,250 + 19,500\\TLV = \ 78,750 \ unfavorable$