Question

at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 78,200 hours at $12.50 per hour. Required: 1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches.

Answer 1

Labor rate variance = $39,100 unfavorable

Labor efficiency variance = $110,400 Unfavorable

Total labor variance = $149,500 unfavorable

Step-by-step explanation:

The computation of total labor variance is shown below:-

Labor rate variance = (Standard rate per hour - Actual rate per hour) × Actual hours paid

= ($12 - $12.25) × 78,200

= $39,100 unfavorable

Labor efficiency variance = (Standard hours per actual output - Actual hours paid) × Standard rate per hour

= 69,000 - 78,200 × $12

= $110,400 Unfavorable

Total labor variance = (Standard hours per actual output × Standard rate per hour) - (Actual hours paid × Actual rate per hour)

= (69,000 ×$12) - (78,200 × $12.5)

= $149,500 unfavorable