Question

The following data relate to product no. 33 of La Quinta Corporation:

Direct labor standard: 5 hours at $16 per hour
Direct labor used in production: 46,000 hours at a cost of $745,200
Manufacturing activity: 8,500 units completed

The direct-labor rate variance is:

The direct-labor efficiency variance is:

Answer 1

Ans. Direct labour rate variance = (Std. per hour-Actual Rate per hour)XActul Hours utilisied

Actual labour rate per hour = 745200/46000 = $16.20

Direct labour Rate variance= (16-16.20)X46000 = $9200(UF)

Direct labour Efficiency variance = (Standared labour hours for actual production-Actual Hours)XStd. rate per hour

Stadared Hours for actual production = 8500X5 = 42500

Actual hours = 46000

Direct labour efficiency variance (42500-46000)X16 = $56000(UF)

Note:

UF= Unfavourable Varaiance or Advers variance