Question

The following labor standards have been established for a particular product: Standard labor hours per unit of output 4.4 hours Standard labor rate $ 17.70 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 6,200 hours Actual total labor cost $ 110,360 Actual output 1,300 units 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 variance, we need to use the following formula:

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

Direct labor rate variance= (17.7 - 17.8)*6,200

Direct labor rate variance= $620 unfavorable

Actual rate= 110,360/6,200= $17.8

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

Direct labor time (efficiency) variance= (1,300*4.4 - 6,200)*17.7

Direct labor time (efficiency) variance= $8,496 unfavorable