Question

The following data relate to labor cost for production of 3,400 cellular telephones:

Actual:	2,300 hrs. at $15.30
Standard:	2,260 hrs. at $15.50

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	$	favorable or unfavorable
Time variance	$	favorable or unfavorable
Total direct labor cost variance	$	favorable or unfavorable

b. The employees may have been less-experienced or poorly trained, thereby resulting in a higher or lower labor rate than planned. The lower level of experience or training may have resulted in more or less efficient performance. Thus, the actual time required was more or less than standard.

Answer 1

a.

1 . direct labor rate variance = AH(AR-SR)

AH=Actual Hours

AR= Actual rate

SR= standard rate

=2,300 ($15.30-$15.50)

=$460 favorable(As the actual cost< standard cost , varinace is unfavorable)

2. .direct labor time variance

= SR(AH-SH)

=$15.50 (2,300-2,260)

=$620 unfavorable(as th actual hours used> standard hours)

3. Total direct labor cost variance = AR*AH-SR*SH

($15.30*2.300)-($15.50*2,260)

=$35,190-$35,030

=$160 unfavorable

b.

he employees may have been less-experienced or poorly trained, thereby resulting in a Lower abor rate than planned. The lower level of experience or training may have resulted in less efficient Performance. Thus, the actual time required was more than standard.

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