Question

After evaluating Null Company’s manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the

asked Dec 25, 2020 29.3k views

After evaluating Null Company’s manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable.

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Ravindra Bhanderi · Answer 1 · 2020-12-29T00:53:14+0000

Answer:

Direct labor rate variance = (SR - AR)
AH

October = ($15 - $15.20)
16,250 = - $3,250 Unfavorable

November = ($15 - $15.25)
22,000 = - $5,500 Unfavorable

Direct Labor Efficiency Variance = (SH - AH)
SR

October = (16,800 - 16,250)
$15 = 8,250 Favorable

November = (18,000 - 22,000)
$15 = - $60,000 Unfavorable

Direct Labor Cost Variance = Standard Cost - Actual Cost

October = $252,000 - $247,000 = $5,000 Favorable

November = $270,000 - $335,500 = - $65,500 Unfavorable

Step-by-step explanation:

Computing variances for each month

Particulars October November Equation

Total units produced 5,600 units 6,000 units (a)

Standard hour per unit 3 hours 3 hours (b)

Total standard hour SH 16,800 18,000 (c) = (a)*(b)

Total standard cost

of labor @ $15 SR per hour $252,000 $270,000 (d) = (c) * 15

Actual hours used AH 16,250 22,000 (e)

Actual cost $247,000 $335,500 (f)

Actual Rate per hour AR $15.20 $15.25 (g) = (f)/(e)

Using the above information we have