Question

The following data relate to labor cost for production of 5,000 cellular telephones: Actual: 3,400 hrs. at $12.9 Standard: 3,350 hrs. at $13.1 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

Answer 1

Given data,

Standard direct labor hours = 3,350 hours

Standard labor rate per hour = $13.10 per hour

Standard direct labor cost = Standard direct labor hours * Standard labor rate per hour

= 3,350 hours * $13.10 per hour = $43,885

Actual direct labor hours = 3,400 hours

Actual labor rate per hour = $12.90 per hour

Actual direct labor cost = Actual direct labor hours * Actual labor rate per hour

= 3,400 hours * $12.90 per hour = $43,860

1. Direct labor rate variance = (Standard labor rate per hour - Actual labor rate per hour) * Actual direct labor hours

= ($13.10 - $12.90) * 3,400 hours = $680 Favorable

2. Direct labor time variance = (Standard labor hours - Actual labor hours) * Standard labor rate per hour

= (3,350 hours - 3,400 hours) * $13.10 per hour = - $655 Unfavorable

3. Direct labor cost variance = Standard direct labor cost - Actual direct labor cost

= $43,885 - $43,860 = $25 Favorable

Rate Variance = $680 Favorable

Time Variance = - $655 Unfavorable

Total direct labor cost variance = $25 Favorable