Question

Direct Labor Variances Greeson Clothes Company produced 17,000 units during June of the current year. The Cutting Department used 3,200 direct labor hours at an actual rate of $13.50 per hour. The Sewing Department used 5,300 direct labor hours at an actual rate of $13.20 per hour. Assume that there were no work in process inventories in either department at the beginning or end of the month. The standard labor rate is $13.40. The standard labor time for the Cutting and Sewing departments is 0.20 hour and 0.30 hour per unit, respectively. a. Determine the direct labor rate, direct labor time, and total direct labor cost variance for the Cutting Department and Sewing Department. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Cutting Department Sewing Department Direct labor rate variance A Direct labor time variance A Total direct labor cost variance time b. The two departments have opposite results. The Cutting Department has a(n) rate and a(n) variance, resulting in a total cost variance. In contrast, the Sewing Department has a(n) but has a time variance, resulting in a total cost variance. rate variance

Answer 1

CUTTING DEPARTMENT

(A)

Labor rate variance = actual hours x (standard rate - actual rate)

= 3200 x ($13.40 - $13.50)

= $320 Unfavorable

(B)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $13.40 x (3400 - 3200)

= $2680 Favorable

Where,

Standard hours = actual output x standard hours per unit of output

= 17000 x 0.20 = 3400 hours

(C)

Total direct labor variance = (standard hours x standard rate) - (actual hours x actual rate)

= (3400 x $13.40) - (3200 x $13.50)

= $45560 - $43200

= $2360 Favorable

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SEWING DEPARTMENT

(A)

Labor rate variance = actual hours x (standard rate - actual rate)

= 5300 x ($13.40 - $13.20)

= $1060 Favorable

(B)

Labor efficiency variance = standard rate x (standard hours - actual hours)

= $13.40 x (5100 - 5300)

= $2680 Unfavorable

Where,

Standard hours = actual output x standard hours per unit of output

= 17000 x 0.30 = 5100 hours

(C)

Total direct labor variance = (standard hours x standard rate) - (actual hours x actual rate)

= (5100 x $13.40) - (5300 x $13.20)

= $68340 - $69960

= $1620 Unfavorable.

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The two departments have opposite results. The Cutting Department has a(n) unfavorable rate and a(n) favorable time variance, resulting in a total $2360 favorable cost variance. In contrast, the Sewing Department has a(n) favorable rate variance but has a unfavorable time variance, resulting in a total $1620 Unfavorable cost variance.