Question

After evaluationg Null Company's manufacturing process, management decides to establish standards of 3 hours of direct labor per unt of product and 15.90 per hour for the labor rate. During October, the company uses 19,100 hours of direct labor at a 307,510 total cost to produce 6,500 units of product. In November, the comapny uses 21,400 hours of direct laobr at a 346,680 total cost to produce 6,800 units of product.

Compute the rate variance, the efficiency variance and the total direct labor costs for October and November

Answer 1

October
Actual Cost			3820				-6360	Standard Cost
AH		AR		AH		SR		SH		SR
19,100		$16.10		19,100		$15.90		19,500		$15.90
	$307,510				$303,690				$310,050
			3820	2540			6360
Direct labor rate variance				3820	Unfavorable
Direct labor efficiency variance				6360	Favorable
Total direct labor variance				$2,540	Favorable
November
Actual Cost			6420				15900	Standard Cost
AH		AR		AH		SR		SH		SR
21,400		$16.20		21,400		$15.90		20,400		$15.90
	$346,680				$340,260				$324,360
			6420	22320			15900
Direct labor rate variance				6420	Unfavorable
Direct labor efficiency variance				15900	Unfavorable
Total direct labor variance				$22,320	Unfavorable