Question

Direct Labor Variances The following data relate to labor cost for production of 20,000 cellular telephones: Actual: 8,450 hrs. at $22.50 Standard: 8,400 hrs. at $23.00
a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Rate variance $ Time variance $ Total direct labor cost variance $
b. The employees may have been less-experienced or poorly trained, thereby resulting in a labor rate than planned. The lower level of experience or training may have resulted in efficient performance. Thus, the actual time required was than standard.

Answer 1

Answer and Explanation:

The computation is given below:

a)  

Direct labor rate variance = (Actual rate - Standard rate) × Actual hours  

= ($22.50 - $23) × 8,450 hours

= -$4,225.00 Favorable

Direct labor time variance = (Actual hours - Standard hours) × Standard rate  

= (8,450 hours - 8,400 hours) × $23

= $ 1,150.00 Unfavorable

Total direct labor cost variance is

= Direct labor rate variance + Direct labor time variance  

= $4,225 Favorable + $1,150 Unfavorable

= -$3,075.00 Favorable

b.  In the case when the employees are not much experienced or they are poorly trained so the less experience cause to less performance due to which the actual time needed should be more than the standard one