Question

Direct labor variances

Bellingham Company produces a product that requires 4 standard direct labor hours per unit at a standard hourly rate of $20.00 per hour. 15,000 units used 62,400 hours at an hourly rate of $19.55 per hour.

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

What is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Round your answers to the nearest dollar. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct labor rate variance	$
b. Direct labor time variance	$
c. Direct labor cost variance	$

Answer 1

a. Direct labor rate variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= (62,400 * $19.55) - (62,400 * $20)

= $28,080 Favorable

b. Direct labor time variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (62,4000 * $20) - (15,000 * 4 * $20)

= $48,000 Unfavorable

c. Direct labor cost variance = (Actual hours * Actual rate) - (Standard hours * Standard rate)

= (62,400 * $19.55) - (15,000 * 4 * $20)

= $19,920 Unfavorable