Question

The following information describes a company’s direct labor usage in a recent period. Actual direct labor...

The following information describes a company’s direct labor usage in a recent period.

Actual direct labor hours used (AH) 65,000
Actual direct labor rate per hour (AR) $ 15
Standard direct labor rate per hour (SR) $ 13
Standard direct labor hours for units produced (SH) 66,900


AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate

Compute the direct labor rate and efficiency variances for the period and classify each as favorable or unfavorable.

Actual Cost Standard Cost

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Homework Answers

Answer #1

Direct Labor Rate and Efficiency Variances

Actual Hours (AH) = 65,000 hours

Actual Rate (AR) = $15.00 per hour

Standard Hours (SH) = 66,900 hours

Standard Rate (SR) = $13.00 per hour

Direct Labor Rate Variance

Direct Labor Rate Variance = Actual Hours x [Actual Rate – Standard Rate]

= AH x [AR – SR]

= 65,000 Hours x [$15.00 - $13.00]

= 130,000 U [Unfavourable]

Direct Labor Efficiency Variance

Direct Labor Efficiency Variance = Standard Rate x [Actual Hours – Standard Hours]

= SR x [AH – SH]

= $13.00 x [65,000 hours – 66,900 hours]

= $24,700 F [Favourable]

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