Question

# Lamp Company produces lamps that require 2 standard hours per unit at a standard hourly rate...

Lamp Company produces lamps that require 2 standard hours per unit at a standard hourly rate of \$20.60 per hour. Production of 6,700 units required 13,130 hours at an hourly rate of \$20.00 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

Determine also if favorable or not favorable

1. Direct labor rate variance:

Direct Labor rate variance = (Standard Rate - Actual Rate) x Actual hrs

= (20.6 - 20) x 13,130

= - \$ 7878 Favorable

2. Labor efficiency variance:

Direct Labor efficiency variance = (Standard hrs - Actual Hrs) x Standard Rate

= (2 x 6700 - 13130) x 20.6

= - \$5562 Favorable

3. Direct Labor cost variance

Direct Labor cost variance = (Standard hrs x Standard Rate - Actual hrs x Actual Rate)

= (13400 x 20.6 – 13130 x 20)

= - \$13440 Favorable

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