Question

The following data relate to labor cost for production of 6,300 cellular telephones:

Actual: | 4,280 hrs. at $15.70 | $67,196 |

Standard: | 4,210 hrs. at $16.00 | $67,360 |

**a.** Determine the direct labor rate variance,
direct labor time variance, and total direct labor cost variance.
Enter all values as a positive number and then identify the
variance (e.g. Favorable or Unfavorable) in the adjacent
column.

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

a. Labor rate variance = (standard rate - actual rate)*actual hours

= (16-15.70)*4280 = $1284 Favorable

Labor time variance = (4210-4280)*16 = $1120 Unfavorable

Total direct labor cost variance = 67360-67196 = $164 Favorable

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