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

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