Question

The standard cost of Product DD is 4 hours of labor at a rate of $12.00 per hour. During the month              
      40,600 hours of labor are incurred at a cost of $12.15 per hour. The company produced 10,000 units   
      of product DD.

A. Calculate the Direct Labor rate variance
B. Calculate the Direct Labor usage variance
C. Calculate the Total Direct labor cost variance

Answer 1

Labour Rate variance
=	Actual hours paid * (standard Rate - Actual Rate)
	40,600 hours * ( 12 - 12.15)
	$   (6,090.00)
Labour usage variance
=	Standard Rate * ( Standard hours - Actual Hours Paid)
	$12 * (40,000 hours - 40,600 hours)
	$   (7,200.00)
	Standard hours = 10,000 * 4
Direct Labour cost variance
=	Standard cost of actual output - Actual Cost
	(10,000 units * 4 hours * $12) - (40,600 hours * $12.15)
	$ (13,290.00)