Question

The standard direct labor cost per unit for a company was $24 (= $15 per hour × 1.6 hours per unit). During the period, actual direct labor costs amounted to $145,600, 9,500 labor-hours were worked, and 6,600 units were produced. Required: Compute the direct labor price and efficiency variances for the period. (Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

Answer 1

$3,135 unfavorable

$9,937.50 unfavorable

Step-by-step explanation:

The formula and the computation of the direct labor price and efficiency variance is shown below:

Direct labor price variance

= (Standard rate - Actual rate) × Actual hours of production

= ($15- $145,600 ÷ 9,500 hours ) × 9,500 labor hour worked

= ($15 - $15.33) × 9,500 labor hour worked

= $3,135 unfavorable

Labor efficiency variance is

= (Actual production - standard production) × standard rate per unit

= (6,600 units - 9,500 hours ÷ 1.6 hours) × $15

= (6,600 units - 5,937.0) × $15

= $9,937.50 unfavorable

Since the actual hours is more than the standard one so it would lead to unfavorable variance