Question

Javonte Co set standards of 3 hours of direct labor per unit of product and $15.90 per hour for the labor rate. During October, the company uses 19,000 hours of direct labor ata $305.900 total cost to produce 6,500 units of product. In November, the company uses 23.000 hours of direct laborat a $371.450 total cost to produce 6,900 units of product. AH - Actual Hours SH - Standard Hours AR - Actual Rate SR - Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost varlance for each of these two months. Classify each variance as favorable or unfavorable. (2) Javonte Investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company Investigate further? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable indicate the effect of each variance by selecting for favorable unfavorable and no variance) October Standard Cost 3 0

Answer 1

	Labor rate variance =Actual hours(Standard rate - Actual rate)
	Labor efficiency variance =Standard Rate(Actual Hours - Standard Hours)
	Direct labor variance =(Standard rate*Standard hours) - (Actual Rate*Actual hours)
	Data for October:
	Standard Rate(SR) =$15.90
	Standard Hours =3 hours*6,500 units =19,500 hours
	Actual Rate(AR) =$305,900 / 19000 hours =$16.10
	Actual Hours(AH) =19,000 hours
	Labor rate variance =19,000($15.90-$16.10) =$3,800(Unfavourable)
	Labor efficiency variance =$15.90(19,000 hours - 19,500 hours) =$7,950(Favourable)
	Direct labor variance =($15.90*19,500) - ($16.10*19,000) =$310,050 - $305,900 =$4,150(Favourable)
	Data for November:
	Standard Rate(SR) =$15.90
	Standard Hours =3 hours*6,900 units =20,700 hours
	Actual Rate(AR) =$371,450 / 23,000 =$16.15 per hour
	Actual Hours(AH) =23,000 hours
	Labor rate variance =23,000($15.90 - $16.15) =$5,750(Unfavourable)
	Labor efficiency variance =$15.90(23,000 hours - 20,700 hours) =$36,570(Unfavourable)
	Direct labor variance =($15.90*20,700) - ($16.15*23,000) =$329,130 - $371,450 =$42,320(Unfavourable)
	Company will investigate Labor efficiency variance