Question

Corpus Christi Bicycle Company manufactures commuter bicycles from recycled materials and records standard costs in its accounts. For March, the company used 780 hours of direct labor at an actual rate of $12.00 per hour. They completed 370 bicycles, and the standard direct labor per bicycle is 2 hours at a standard rate of $12.20 per hour. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance for March. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

The direct labor rate variance is -$156 (favorable), the direct labor time variance is $6,426 (unfavorable), and the total direct labor cost variance is $6,270 (unfavorable).

Step-by-step explanation:

The direct labor rate variance is calculated by multiplying the difference between the actual labor rate and the standard labor rate by the actual hours of labor used. In this case, the actual labor rate is $12.00 per hour and the standard labor rate is $12.20 per hour. The actual hours of labor used are 780, so the direct labor rate variance is ($12.00 - $12.20) * 780 = -$156 (favorable).

The direct labor time variance is calculated by multiplying the difference between the actual labor hours and the standard labor hours by the standard labor rate. In this case, the actual labor hours are 780 and the standard labor hours per bicycle are 2. The standard labor rate is $12.20 per hour, so the direct labor time variance is (780 - (370 * 2)) * $12.20 = $6,426 (unfavorable).

The total direct labor cost variance is calculated by adding the direct labor rate variance to the direct labor time variance. In this case, the direct labor rate variance is -$156 and the direct labor time variance is $6,426, so the total direct labor cost variance is -$156 + $6,426 = $6,270 (unfavorable).