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After evaluating Null Company's manufacturing process management decides to establish standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October the company uses 16.250 hours of direct laborat a $247,000 total cost to produce 5.600 units of product. In November the company uses 22.000 hours of direct labor ata $335,500 total cost to produce 6,000 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 variance for each of these two months. Classify each variance as favorable or unfavorable. October Actual Cost Standard Cost ΔΗ 16 2501 247.000

Answer 1

October AH Actual cost AH X 16,250 X $247.000 AR $15.20 AR $15.00 Standard cost AH X AR 16,800 X $15.00 $252.000 16.250 $243,750 $3,250 $8.250 Direct labor rate variance Direct labor efficiency variance Total Direct labor varinace $3,250 Unfavorable $8,250 Favorable $5,000 Favorable November AH Actual cost AH XAR 22,000 X $15.25 $335,500 AH 22.000 AR $15.00 Standard cost XAR 18,000 X $15.00 $270,000 $330.000 $5,500 $60,000 Direct labor rate variance Direct labor efficiency variance Total Direct labor varinace $5,500 Unfavorable $60,000 Unfavorable $65,500 Unfavorable Workings: October Actual hours Standard hours 5.600 units * 3 hours per unit = Actual Rate $247.000 / 16,250 hrs = Standard Rate 16.250 hrs 16.800 hrs $15.20 per hr $15.00 per hr November Actual hours Standard hours 6.000 units * 3 hours per unit = Actual Rate $335,500 /22.000 hrs = Standard Rate 22.000 hrs 18.000 hrs $15.25 per hr $15.00 per hr