Question

Direct Labor Variances

The following data relate to labor cost for production of 3,200 cellular telephones:

Actual:	2,180 hrs. at $13.9
Standard:	2,150 hrs. at $14.1

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.

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Answer 1

a.

	Formula	working	Variance
Rate variance	actual hours * (actual rate - standard rate)	2,180*($13.9-14.10)	- $436	favorable variance
Time variance	standard rate *(actual hours - standard hours)	$14.10*(2180-2150)	$423	unfavourable variance
total direct labour cost variance	direct labour variance + direct labour cost variance	-$436+$423	-$13	favorable variance

b.

The labour may have been less experienced or poorly trained, thereby resulting in a LOWER labour 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.