Question

The following data relate to labor cost for production of 6,500 cellular telephones:

Actual:	4,410 hrs. at $13.60
Standard:	4,340 hrs. at $13.80

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

a.

Direct labor rate variance = (Actual rate - Standard rate) * Actual hours

Direct labor rate variance = ($13.60 - $13.80) * 4,410 = $882 Favorable

Direct labor time variance = (Standard hours - Actual hours) * Standard rate

Direct labor time variance = (4,340 - 4,410) * $13.80 = $966 Unfavorable

Total direct labor cost variance = $84 Unfavorable

b.

The employees may have been less experienced or poorly trained, thereby resulting in low labor rate than planned. The lower level of experience or training may have resulted in low efficient performance. Thus, the actual time required was more than standard.