Question

Direct Labor Variances

The following data relate to labor cost for production of 22,000 cellular telephones:
Actual: 4,220 hrs. at $44.50
Standard: 4,160 hrs. at $46.00
a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Rate variance $
Time variance $
Total direct labor cost variance $
b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a labor rate than planned. The lower level of experience or training may have resulted in efficient performance. Thus, the actual time required was than standard.

Answer 1

Step-by-step explanation:

a. The Direct labor rate variance will be:

= 4220 × (44.5 - 46)

= 4220 × -1.5

= -6330 Favorable

The direct labor time variance will be:

= 46 × (4220-4160)

= 46 × 60

= 2760 Unfavorable

Total direct labor cost variance will be:

= (4220 × 44.5) - (4160 × 46)

= 187790 - 191360

= -3570 Favorable

b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a (lower) labor rate than planned.

The lower level of experience or training may have resulted in (less) efficient performance. Thus, the actual time required was (more) than standard.