Question

Direct Labor Variances

Bellingham Company produces a product that requires 10 standard direct labor hours per unit at a standard hourly rate of $19.00 per hour. If 4,600 units used 46,900 hours at an hourly rate of $18.05 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct labor rate variance	$	Favorable
b. Direct labor time variance	$	Favorable
c. Direct labor cost variance	$	Favorable

Answer 1

Actual time used = 46,900 hours

Actual rate = $18.05 per hour

Standard rate = $19.00 per hour

Standard time = 10 hours per unit

Actual output = 4,600 units

Hence, standard time for actual output = 4,600 x 10

= 46,000 hours

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

= 46,900 x (19 - 18.05)

= $44,555 (Favorable)

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

= 19 x (46,000 - 46,900)

= $17,100 (Unfavorable)

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

= (19 x 46,000) - (18.05 x 46,900)

= 874,000 - 846,545

= $27,455 (Favorable)

a. Direct labor rate variance	$44,555	Favorable
b. Direct labor time variance	$17,100	Unfavorable
c. Direct labor cost variance	$27,455	Favorable

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