Question

Bellingham Company produces a product that requires 10 standard direct labor hours per unit at a standard hourly rate of $22.00 per hour. If 4,300 units used 41,300 hours at an hourly rate of $23.10 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 $ Unfavorable b. Direct labor time variance $ Favorable c. Direct labor cost variance $ Unfavorable

Answer 1

Solution:

Here,

Actual Rate = $23.10 per hour

Standard Rate = $22 per hour

Actual hours worked = 41,300 hrs

Standard hours worked = 4300 units * 10 hrs

= 43,000 hrs

Direct Labor Rate Variance = Actual hour ( Actual Rate - Standard Rate )

= 41,300 ( 23.10 -  22 )

= 41,300 * 1.1

= - 45,430 Favorable

Direct Labor Time Variance = ( Actual hours - Standard hours ) * Standard Rate

= ( 41,300 - 43,000 ) * 22

= 1700 * 22

= 37,400 Unfavorable

Direct Labor Cost Variance = Direct Labor Rate Variance + Direct Labor time Variance

= 45,430 F + 37,400 U

= -8,030 F