Question

The standard cost of Product DD is 4 hours of labor at a rate of $12.00 per hour. During the month, 40,600 hours of labor are incurred at a cost of $12.15 per hour. The company produced 10,000 units of product DD.

A. Calculate the Direct Labor rate variance.
a) $500 unfavorable
b) $500 favorable
c) $60,000 unfavorable
d) $60,000 favorable

B. Calculate the Direct Labor usage variance.
a) $4,600 unfavorable
b) $4,600 favorable
c) $48,600 unfavorable
d) $48,600 favorable

C. Calculate the Total Direct labor cost variance.
a) $4,100 unfavorable
b) $4,100 favorable
c) $58,600 unfavorable
d) $58,600 favorable

Answer 1

A. The Direct Labor rate variance is $6,000 unfavorable. B. The Direct Labor usage variance is $7,200 unfavorable. C. The Total Direct labor cost variance is $4,100 unfavorable.

Step-by-step explanation:

A. Calculate the Direct Labor rate variance:

The standard labor cost per unit is $12.00 per hour, and the actual labor cost per unit is $12.15 per hour. The standard labor hours for 10,000 units of Product DD is 40,000 hours (10,000 units x 4 hours per unit). The actual labor hours incurred is 40,600 hours.

The formula for calculating the Direct Labor rate variance is:

Direct Labor rate variance = (Actual labor rate - Standard labor rate) x Standard labor hours

Plugging in the values:

Direct Labor rate variance = ($12.15 - $12.00) x 40,000 = $6,000

Therefore, the Direct Labor rate variance is $6,000 unfavorable.

B. Calculate the Direct Labor usage variance:

The standard labor hours for 10,000 units of Product DD is 40,000 hours (10,000 units x 4 hours per unit). The actual labor hours incurred is 40,600 hours.

The formula for calculating the Direct Labor usage variance is:

Direct Labor usage variance = (Actual labor hours - Standard labor hours) x Standard labor rate

Plugging in the values:

Direct Labor usage variance = (40,600 - 40,000) x $12.00 = $7,200

Therefore, the Direct Labor usage variance is $7,200 unfavorable.

C. Calculate the Total Direct labor cost variance:

The formula for calculating the Total Direct labor cost variance is:

Total Direct labor cost variance = (Actual labor cost - Standard labor cost)

Plugging in the values:

Total Direct labor cost variance = (40,600 x $12.15 - 40,000 x $12.00) = $4,100

Therefore, the Total Direct labor cost variance is $4,100 unfavorable.