Question

The company produces a single product and has prepared the following standard cost sheet for one   
      unit of the product.

               Direct Labor:   3 hours at $12.00 per hour

      During the month, the company manufactures 235 units and incurs the following actual costs.

               Direct labor: 700 hours at $11.80 per hour

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

Answer 1

Standard rate = $12 per hour

Standard time = 3 hour per unit

Actual output = 235 units

Standard time for actual output = Standard time x Actual output

= 3 x 235

= 705 hour

Actual rate = $11.80 per hour

Actual time = 700 hour

A.

Direct labor rate variance = Actual time x (Standard rate- Actual rate)

= 700 x (12-11.80)

= 700 x (0.20)

= $140 favorable

B.

Direct labor usage variance = Standard rate x (Standard time- Actual time)

= 12 x (705-700)

= 12 x 5

= $60 favorable

C.

Total direct labor cost variance = ( Standard rate x Standard time) - (Actual rate x Actual time)

= (12 x 705) - (11.80 x 700)

= 8,460-8,260

= $200 favorable