Direct Labor Variances
The following data relate to labor cost for production of 5,700 cellular telephones:
Actual: | 3,880 hrs. at $13.1 | |
Standard: | 3,820 hrs. at $13.3 |
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 labor rate than planned. The lower level of experience or training may have resulted in efficient performance. Thus, the actual time required was than standard.
a. Rate variance = (standard rate - actual rate)*actual hours
= (13.3-13.1)*3880 = $776 favorable
Time variance = (3820-3880)*13.3 = 798 unfavorable
Total direct labor cost variance = 3820*13.3 - 3880*13.1 = $22 unfavorable
b. Actual time required was higher than standard.
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