Question

Lee Maritime Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Lee uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 3 pounds per unit; $4 per pound Direct labor: 5 hours per unit; $15 per hour Lee produced 5,000 units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $378,000. What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

Answer 1

rate variance $ 72,000.00 F

efficiency variance $ 75,000.00 U

Total Variance: 3,000.00 U

Step-by-step explanation:

DIRECT LABOR VARIANCES

`(standard\:rate-actual\:rate) * actual \: hours = DL \: rate \: variance`

std rate $ 15.00

actual rate $ 12.60 (378,000 labor cost / 30,000 labor hours)

actual hours 30,000

difference $2.40

rate variance $72,000.00

As the company wages were lower than expected, it saved rate-related cost

`(standard\:hours-actual\:hours) * standard \: rate = DL \: efficiency \: variance`

std hours 25000.00 (5,000 units x 5hours each = 25,000)

actual hours 30000.00

std rate $15.00

difference -5000.00

As the company use more hours the cost were higher than standard

efficiency variance $(75,000.00)