Japan Company produces lamps that require 3 standard hours per unit at a standard hourly rate of $20.00 per hour. Production of 5,700 units required 16,590 hours at an hourly rate of $20.60 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: | |
Particulars | Formula and Calculation |
a. Direct labor rate variance: | = (Actual Rate - Standard Rate) * Actual Hours |
= (20.60 - 20) * 16590 | |
= $ 9954 (U) | |
b. Direct labor time variance: | = (Standard Hours - Actual Hours) * Standard rate |
= ((5700 *3) - 16590) * 20 | |
= $ - 10200 (F) | |
c. Total direct labor cost variance: | = (Actual Hours * Actual Rate) - (Standard hours * Standard Rate) |
= (16590 * 20.60) - (17100 * 20) | |
= $ - 246 (F) | |
Favorable variances entered as negative numbers.
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