Question

The following labor standards have been established for product of

16 hours 12.75 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked 6,600 hours
Actual total labor cost $131,340
Actual output 1,600 units
1. What is the labor rate variance for the month?
2. What is the labor efficiency varaiance for the month?

Answer 1

Answer and Explanation:

The computation is shown below:

a. The labor rate variance is

= actual labor cost - (standard rate × actual hours)

= ($131,340) - ($12.75 × 6,600 hours)

= $47,190 unfavorable

b. The labor efficency variance is

= (actual hours - standard hours) × standard rate

= (6,600 - (1,600 × 16) × $12.75

= $242,250 favorable

In this way it can be calculated and the same is to be considered and relevant