Question

At Roger, the standard quantity of labor is 25 hours per refrigeration unit. The standard wage rate is $36. In July, the company produced 83 refrigeration units and incurred 2,100 labor hours at a cost of $65,100.

Calculate the labor rate variance and the labor efficiency variance. Indicate whether the variances are favorable or unfavorable. (Round intermediate calculations to 2 decimal places, e.g. 14.37 and final answers to 0 decimal places, e.g. 125. Enter all variances as a positive number.)

Labor Rate Variance $___________   Unfavorable, Neither Unfavorable nor Favorable, Favorable?

Labor Efficiency Variance    $_________ Unfavorable, Neither Unfavorable nor Favorable, Favorable?

Answer 1

direct labor rate variance = (Actual rate - standard rate) * actual hours.

here,

actual rate = $65,100 cost / 2100 hours

=>$31.

standard rate = $36.

actual hours = 2100

direct labor rate variance = ($31 - $36)*2100

=>$10,500 Favorable.

direct labor efficiency variance

(actual hours - standard hours) *standard rate

here,

actual hours = 2100 hours

standard hours = 83 units *25 hours

=>2,075 hours

standard rate = $36.

=> (2100 - 2075)*$36

=>$900 unfavorable.