Question

Airon Company recently completed 11,200 units of its single product, consuming 34,000 labor hours that cost...

Airon Company recently completed 11,200 units of its single product, consuming 34,000 labor hours that cost the firm $598,400. According to manufacturing specifications, each unit should have required 3 hours of labor time at $18.00 per hour.

On the basis of this information, determine Airon’s labor rate variance and labor efficiency variance.

Rate Efficiency
A. $13,440F $7,040F
B. $13,440F $7,040U
C. $13,600F $7,200F
D. $13,600F $7,200U
E. $13,600U $7,200U
Business   Accounting   
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Answer #1

Answer- Direct Labor rate variance = $13600 Favorable .

Direct Labor Efficiency variance = $7200 Unfavorable.

Explanation- Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

= {$18.00 per hour – ($598400/34000 hours)* 34000 hours   

= $13600 Favorable

Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour

= (33600 hours – 34000 hours)*$18.00 per hour

= $7200 Unfavorable

Where- Standard Hours = No. of hours per unit*Actual output

= 3 hours per unit *11200 units

= 33600 hours

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