Question

Information regarding Maxwell’s direct labor cost for the month of January follows:

Direct labor hourly rate paid	$	28.50
Total standard direct labor hours for units produced this period		11,000
Direct labor hours actually worked		10,800
Direct labor rate variance	$	16,000	favorable

Required:

1. Compute the standard direct labor wage rate per hour in January. (Round your answer to 2 decimal places.)

2. Compute the direct labor efficiency variance for January. Was this variance favorable (F) or unfavorable (U)? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

Answer 1

1) Direct labour rate variance = (Standard rate-actual rate)actual hour

16000 = (X*10800-307800)

16000 = 10800X-307800

-10800X = -323800

X(standard direct labour rate) = 323800/10800 = $29.98 per hour

Direct labour efficiency variance = (standard hour-actual hour)Standard rate

                                                = (11000-10800)*29.98

Direct labour efficiency variance = 5996 Favorable