Question

Direct Labor Variances Bellingham Company produces a product that requires 3 standard hours per unit at a standard hourly rate of $9.00 per hour. If 3,500 units required 10,700 hours at an hourly rate of $8.82 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) 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. a. Direct labor rate variance $ b. Direct labor time variance $ c. Total direct labor cost variance $

Answer 1

(A)
Labor rate variance = actual hours x (standard rate - actual rate)
= 10700 x ($9 - $8.82)
= $1926 Favorable

(B)
Labor time variance = standard rate x (standard hours - actual hours)
= $9 x (10500 - 10700)
= $1800 Unfavorable
Where,
Standard hours = actual output x standard hours per unit of output
= 3500 x 3 = 10500 hours

(C)

total labor cost variance = Labor rate variance + labor efficiency variance

= $1926 favorable + $1800 unfavorable

= $126 Favorable