Question

Japan Company produces lamps that require 2 standard hours per unit at a standard hourly rate of $14.30 per hour. Production of 6,100 units required 11,960 hours at an hourly rate of $13.90 per hour.

What is the direct labor (a) rate variance, (b) time variance, and (c) total cost variance? Enter favorable variances as negative numbers.

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

Answer 1

(a)-Direct labor rate variance

Direct labor rate variance = AH x (AR – SR)

= 11,960 Hrs x [$13.90 - $14.30]

= $4,784 Favorable

(b)-Direct labor time variance

Direct labor time variance = SR x (AH – SH)

= $14.30 x [11,960 Hrs – (6,100 x 2)]

= $14.30 x [11,960 Hrs – 12,200 Hrs]

= $3,432 Favorable

(c)-Total direct labor cost variance

Total direct labor cost variance = [AH x AR] – [SH x SR]

= [11,960 Hrs x $13.90] – [12,200 Hrs x $14.30]

= $166,244 - $174,460

= $8,216 Favorable