Question

Direct Labor Variances

The following data relate to labor cost for production of 5,300 cellular telephones:

Actual: 3,570 hrs. at $15.2
Standard: 3,510 hrs. at $15.5

a. Determine the direct labor The cost associated with the difference between the standard rate and the actual rate paid for direct labor used in producing a commodity.rate variance, direct labor The cost associated with the difference between standard and actual hours of direct labor spent for producing a commodity.time variance, and total direct labor The difference between actual cost and the flexible budget at actual volumes.cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Rate variance $   

Favorable
Unfavorable

Time variance $   

Favorable
Unfavorable

Total direct labor cost variance $   

Favorable
Unfavorable

b. The employees may have been less-experienced or poorly trained, thereby resulting in a

higher
lower

labor rate than planned. The lower level of experience or training may have resulted in

more
less

efficient performance. Thus, the actual time required was

more
less

than standard

Answer 1

Std hours: 3510 hours
Std rate per hour: $ 15.50 per hour
Actual Hours worked: 3570 hours
Actual Rate per hour: $ 15.20 per hour
Labour cost variance: Std hours*Std rate - Actual Hours*Actual rate
		3510 *15.50 - 3570 *15.20 = 141 Fav
Labour rate variance: Actual Hours (Std rate-Actual rate)
		3570 (15.50 - 15.20) = 1071 Fav
Labour efficiency Variance: Std rate (Std hours-Actual Hours)
		15.50 (3510-3570) = 930 Unfav
Reqb:
The employees may have been less experienced or poorly trained, thereby resulting in a
Lower labour rate than planned.
The low level of experience or traiining may have resulted in
Less Efficient performance
Thus the actual time required was
More than standard