Question

Direct Labor Variances

The following data relate to labor cost for production of 7,100 cellular telephones:

Actual:	4,810 hrs. at $15.6
Standard:	4,730 hrs. at $15.8

a. Determine 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.

Rate variance	$
Time variance	$
Total direct labor cost variance	$

b. The employees may have been less-experienced or poorly trained, thereby resulting in a ___(higher or Lower)___ labor rate than planned. The lower level of experience or training may have resulted in __(more or less)__ efficient performance. Thus, the actual time required was ___ (more or less)___then standard.

Answer 1

a)

Actual time used = 4,810 hours

Actual rate = $15.6 per hour

Standard rate = $15.8 per hour

Standard time = 4,730 hours

Direct labor rate variance = Actual time x (Standard rate - Actual rate)

= 4,810 x (15.8 - 15.6)

= $962 (Favorable)

Direct labor time variance = Standard rate x (Standard time - Actual time)

= 15.8 x (4,730 - 4,810)

= $1,264 (Unfavorable)

Direct labor cost variance = (Standard rate x Standard time) – (Actual rate x Actual time)

= (15.8 x 4,730) - (15.6 x 4,810)

= 74,734 - 75,036

= $302 (Unfavorable)

Rate variance	- $	962
Time variance	$	1,264
Total direct labor cost variance	$	302

b)

The employees may have been less-experienced or poorly trained, thereby resulting in a ___higher ___ labor rate than planned. The lower level of experience or training may have resulted in __less__ efficient performance. Thus, the actual time required was ___ more__then standard.

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