Question

Engineered cost variances Fred’s Freight employs three drivers who are paid $26 per hour for regular time and $39 for overtime. A single pickup and delivery requires, on average, one hour of driver time. Drivers are paid for a 40-hour week because they must be on call all day. One driver stands by for after-hour deliveries. Analyze the labor cost variances for one week in which the company made 106 daytime deliveries and 10 after-hour deliveries. The payroll for drivers for that week was $3,677. The employees worked 121 hours of regular time and 15 hours of overtime. Total variance Rate variance Efficiency variance

Answer 1

Labor rate variance	54	F
Labor efficieny variance	756	U

Working:

Actual working:
Regulrar work	121
Overtime work	15
Regular work expense (121 x $26)	3146
Overtime work expense (15 x $39)	585
Total Standard expense	3731
Actual expense	3677
Rate Variance	54
Total numbr of deliveries	116
Hours required per delivery	1
Standard hours for actual deliveries	116
Actua hours worked	137
Efficiency variance (116 - 137) x 26	-756