Question

Direct Labor Variances Glacier Bicycle Company manufactures commuter bicycles from recycled materials. The following data for October are available: Quantity of direct labor used 5,000 hrs. Actual rate for direct labor $22.75 per hr. Bicycles completed in October 800 bicycles Standard direct labor per bicycle 6.0 hrs. Standard rate for direct labor $24.00 per hr. a. Determine for October the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

The total cost variance of labor will be "-1,450 (favorable)". The further explanation is given below.

Step-by-step explanation:

According the question,

Direct labor rate variance will be:

⇒
`5000* (22.75-24)`

⇒
`5000* (-1.25)`

⇒
`-6,250 \ (favorable)`

Direct labor time variance will be:

⇒
`24* (5000-800* 6)`

⇒
`24* 200`

⇒
`4,800 \ (unfavorable)`

Now,

The Total Direct labor cost variance will be:

⇒
`(5000* 22.75)-(800* 6* 24)`

⇒
`(113,750)-(115,200)`

⇒
`-1,450 \ (favorable)`

Answer 2

a) i. Direct labor rate variance = Quantity of direct labor used * (Actual rate for direct labor - Standard rate for direct labor)

= 5,000*(22.75-24)

= -6,250 (Favorable)

ii. Direct labor time variance = Standard rate for direct labor * (Quantity of direct labor used - Bicycles completed in October * Standard direct labor per bicycle)

= 24 * (5000 - 800 * 6)

= 4,800 (Unfavorable)

iii. Total Direct labor cost variance = (Quantity of direct labor used * Actual rate for direct labor) - (Bicycles completed in October * Standard direct labor per bicycle * Standard rate for direct labor)

= (5000 * 22.75) - (800 * 6 * 24)

= -1450 (Favorable)