Question

The following labor standards have been established for a particular product:Standard labor hours per unit of output 4.4 hoursStandard labor rate $ 20.20 per hourThe following data pertain to operations concerning the product for the last month:Actual hours worked 7,000 hoursActual total labor cost $ 142,100Actual output 1,500 unitsRequired:a. What is the labor rate variance for the month?b. What is the labor efficiency variance for the month?

Answer 1

Answer:

Direct labor rate variance= $700 unfavorable

Direct labor time (efficiency) variance= $8,080 unfavorable

Explanation:

Giving the following information:

Standard labor hours per unit of output 4.4 hours

Standard labor rate $20.20 per hour

Actual hours worked 7,000 hours

Actual total labor cost $142,100

Actual output of 1,500 units

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 142,100/7,000= $20.3

Direct labor rate variance= (20.2 - 20.3)*7,000

Direct labor rate variance= $700 unfavorable

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Standard quantity= 1,500*4.4= 6,600

Direct labor time (efficiency) variance= (6,600 - 7,000)*20.2

Direct labor time (efficiency) variance= $8,080 unfavorable