Question

Elk Creek Company’s most popular product requires specialized labor. The employees are highly productive, but also highly paid. The following standards have been developed for the product: 2 direct labor hours/unit $45/direct labor hour During November, Elk Creek produced 3,600 units and used 7,000 direct labor hours at a cost of $378,000. What is the direct labor quantity variance for November?

Answer 1

Answer:

The direct labor quantity variance for November=$9,000

Explanation:

To calculate the direct labor quantity variance, multiply the standard rate by the difference between the total standard hours of direct labor and the total actual hours of direct labor.

This can be expressed as;

Direct labor quantity variance=(Total standard hours-Total actual hours)×standard rate

where;

Total standard hours=rate×actual number of units produced

Total standard hours=(2×3,600)=7,200 hours

Total actual hours=7,000 hours

Standard rate=$45

replacing;

Direct labor quantity variance=(Total standard hours-Total actual hours)×standard rate

Direct labor quantity variance=(7,200-7,000)×45

Direct labor quantity variance=(200×45)=9,000

Direct labor quantity variance=$9,000