Question

Direct Labor Variances

Tip Top Corp. produces a product that requires 8 standard hours per unit at a standard hourly rate of $14 per hour. If 3,900 units required 32,100 hours at an hourly rate of $13.3 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) 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. Direct labor cost variance

Ruby Company produces a chair that requires 5 yards of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard.

Determine the following: Enter favorable variances as negative numbers.

a. Price variance	$
b. Quantity variance	$
c. Cost variance

Answer 1

(1)

(a) Direct Labour Rate Variance = (SR – AR) * A Hrs

     (14 – 13.3) * 32100 = 22470 (F)

(b) Direct Labour Time Variance = (S Hrs – A hrs) * SR

    S Hrs = 3900 * 8 = 31200 Hrs

(31200 – 32100) * 14 = 12600 (U)

(c) Direct Labour Cost Variance = (Std Cost – Actual cost)

Std cost = 3900 * 8 * 14 = 436800

Actual cost = 32100 * 13.3 = 426930

(436800 – 426930) = 9870 (F)

(2)

(a) Material Price Variance = (SR – AR) * AQ

(7.50 – 7.55) * 43600 = 2180 (U)

(b) Material Quantity Variance = (SQ – AQ) * SR

SQ = 8500 * 5 = 42500 yds

(42500 – 43600) * 7.50 = 8250 (U)

(c) Material Cost Variance = (Std cot – Actual Cost)

Std cost = 8500 * 5 * 7.50 = 318750

Actual cost = 43600 * 7.55 = 329180

(318750 – 329180) = 10430 (U)