Question

The following labor standards have been established for a particular product:Standard labor hours per unit of output 4.0 hoursStandard labor rate $19.80 per hoursThe following data pertain to operations concerning the product for the last month:Actual hours worked 6,600 hoursActual total labor cost $131,340Actual output 1,600 unitsWhat is the labor rate variance for the month? F or UWhat is the labor efficiency varaiance for the month? F or U

Answer 1

Answer:

rate variance = 660 U

efficiency variance = 3,960 U

Explanation:

$(standard\:rate-actual\:rate) \times actual \: hours DL \: rate \: variance$

std rate  $19.80

actual rate  $19.90

actual hours 6,600

$(19.80 - 19.90) \times 22,500 = DL \: rate \: variance$

difference  $(0.10)

Each hour cost 10 cent more than expected. This variance will be unfavorable

0.10 extra per hour times 6,600

rate variance  $(660.00)

$(standard\:hours-actual\:hours) \times standard \: rate = DL \: efficiency \: variance$

std  hours 6400.00

actual hours 6600.00

std rate  $19.80

$(6,400 - 6,600) \times 19.80 = DL \: efficiency \: variance$

difference -200.00

For the unit output, the actual hours were more than expected. This variance will be unfavorable.

200 extra hours times 19.8 each

efficiency variance  $(3,960.00)