Question

Required information

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A manufactured product has the following information for June.

	Standard	Actual
Direct materials	7 lbs. @ $8 per lb.		62,900	lbs. @ $8.10 per lb.
Direct labor	3 hrs. @ $17 per hr.		26,400	hrs. @ $17.50 per hr.
Overhead	3 hrs. @ $13 per hr.	$	352,500
Units manufactured			8,900

Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Rate per hour" answers to 2 decimal places.)

AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

Answer 1

Answer

Given that

Standard rate	$    17.00
Standard hours (8900*3)	$ 26,700
Actual rate	$    17.50
Actual hours	$ 26,400

Labor rate Variance = (Standard rate-Actual rate)*Actual hours

Labor rate Variance = ($ 17 - $ 17.5) * 26,400

Labor rate Variance = $ 13,200 (U)

Labor efficiency Variance = (Standard hours (8900*3)-Actual hours)*Standard rate

Labor efficiency Variance = (26,700 - 26,400) * $ 17

Labor efficiency Variance = $ 5,100 (F)

In case of any doubt, please comment.