Question

The following labor standards have been established for a particular product:

Standard labor hours per unit of output 4.0 hours
Standard labor rate $17.70 per hour
The following data pertain to operations concerning the product for the last month: Actual hours worked 7,600 hours
Actual total labor cost $135,280
Actual output 1,800
Required:
a. What is the labor rate variance for the month?
b. What is the labor efficiency variance for the month?

Answer 1

Results are below.

Step-by-step explanation:

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (17.7 - 17.8)*7,600

Direct labor rate variance= $760 unfavorable

Actual rate= 135,280/7,600= $17.8

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (4*1,800 - 7,600)*17.7

Direct labor time (efficiency) variance= $7,080 unfavorable