Question

# The standards for product G78V specify 6.1 direct labor-hours per unit at \$14.10 per direct labor-hour....

The standards for product G78V specify 6.1 direct labor-hours per unit at \$14.10 per direct labor-hour. Last month 1,800 units of product G78V were produced using 11,030 direct labor-hours at a total direct labor wage cost of \$146,220.

Required:

a. What was the labor rate variance for the month?

b. What was the labor efficiency variance for the month?

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Source Table for calculation of Direct Labour Variances

 Standard for Actual for 1800 Units Actual for 1800 Units
 Particulars Hours Rate Amount Hours Rate Amount For product G78V 10980 (1800* 6.1 Hours) 14.10 (Given) 154818 11030 (Given) 13.2566 (146220/11030) 146220 (Given)

Calculation of Direct Labour Variances:

(a) Labour Rate Variance= (Standard Rate - Actual Rate) x Actual Hours

= (14.10-13.2566) x 11030

= 9303 (F) (Approx)

(b) Labour Efficiency Variance= (Standard hours for actual output-Actual Hours) x Standard Rate

= (10980-11030) x 14.10

= 705 ( U)

Verification: Labour Cost Variance= Labour Rate Variance + Labour Efficiency Variance

=9303+(705)

= 8598 (F)