Question

The standards for product G78V specify 5.6 direct labor-hours per unit at $13.60 per direct labor-hour. Last month 1,750 units of product G78V were produced using 9,850 direct labor-hours at a total direct labor wage cost of $130,220. Required: a. What was the labor rate variance for the month? b. What was the labor efficiency variance for the month?

Answer 1

a. $3,740 Favorable

b. $680 Unfavorable

Step-by-step explanation:

The computation of labor rate variance and labor efficiency variance is shown below:-

Labor rate variance = Actual cost - (Actual hours × Standard rate)

= $130,220 - (9,850 × $13.60)

= $130,220 - 133,960

= $3,740 Favorable

Labor efficiency variance = Standard rate × (Actual hours - Standard hours)

= $13.60 × (9,850 - 1,750 × 5.6)

= $13.60 × 50

= $680 Unfavorable