Question

The following data relate to labor cost for production of 5,200 cellular telephones: Actual: 3,500 hrs. at $15.60 Standard: 3,440 hrs. at $15.90 a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. 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

Ans. A	Labor rate variance = (Actual rate - Standard rate) * Actual hours
	($15.60 - $15.90) * 3,500
	-$0.30 * 3,500
	-$1,050	Favorable
	Labor time variance = (Actual hours - Standard hours) * Standard rate
	(3,500 - 3,440) * $15.90
	60 * $15.90
	$954	Unfavorable
	Total direct labor cost variance = Labor time variance + Labor rate variance
	$954 + (-$1,050)
	$954 - $1,050
	-$96	Favorable
Ans. 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 more than standard.