Question

The budget for the month of May was for 11,200 units at a direct materials cost of $19 per unit. Direct labor was budgeted at 28 minutes per unit for a total of $100,800. Actual output for the month was 8,900 units with $137,500 in direct materials and $81,775 in direct labor expense. The direct labor standard of 28 minutes was obtained throughout the month. Variance analysis of the performance for the month of May would show a(n): (CMA adapted)

Answer 1

Answer:

Direct labor price(rate) variance = $1,675  (unfavorable)

Direct labor efficiency variance = 0

Explanation:

As per the data given in the question,

Number of units = 11,200

cost = $19 per unit

Labor budgeted = at 28 minutes per unit

Total budget = $100,800

Actual output = 8,900 units

Direct material expense = $137,500

Direct labor expense = $81,775

As per the following formula,

Direct labor price variance = (Actual price - Standard price) × Actual hour

= ($81,775 ÷ 8900 × 2 - $100,800 ÷ 11,200 × 2) × 8,900 ÷ 2

= $1,675  (unfavorable)

Direct labor efficiency variance = (Actual hour - Standard hour) × Standard price

= (8,900 × 28 ÷ 60 - 8,900 × 28 ÷ 60 ) × $100,800 ÷ 11,200 × 2

= 0