Question

Direct Labor Variances Bellingham Company produces a product that requires 9 standard direct labor hours per...

Direct Labor Variances

Bellingham Company produces a product that requires 9 standard direct labor hours per unit at a standard hourly rate of \$20.00 per hour. If 2,100 units used 18,500 hours at an hourly rate of \$20.40 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 \$

Information given in the problem-:

1 unit of product requires 9 standard hours @\$20 per hour.

Actual production -: 2,100 units. Actual labor hours -: 18,500 hours @\$20.40 per hour

a) Direct labor rate variance is computed by Actual hours X actual rate - Actual hours X standard rate

=18,500 X 20.40 - 18,500 X 20

=\$377,400 - \$370,000

b) Direct labor time variance is computed by Standard hours X standard rate - actual hours X standard rate

=2,100 X 9 X 20 - 18,500 X 20

=\$378,000 - \$370,000

=\$8,000 (Favorable)

c) Direct Labor cost variance is computed by Actual hours X actual rate - standard hours X standard rate

=18,500 X 20.4 - 2,100 X 9 X 20

=\$377,400 - \$378,000

=\$600 (Favorable)

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