Question

Required information [The following information applies to the questions displayed below.] A manufactured product has the following information for June Standard 7 lbs.$8 per lb. 3 hrs.$15 per hr 3 hrs. $11 per hr Actual 53,600 lbs.@ $8.10 per lb 22,400 hrs.@$15.40 per hr. $257,700 7,600 Direct materials Direct labor Overhead Units manufactured Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "Rate per hour" answers to 2 decimal places.) AH = Actual Hours SH= Standard Hours AR = Actual Rate SR = Standard Rate

Answer 1

Direct Labor Rate Variance= (Actual Hours * Actual Rate ) - ( Actual Hours * Standard Rate)

= ( 22400* $ 15.40)- (22400* $ 15.00)

=22,400 hours * ( $ 15.40- $15.00)

= $ 8,960 Unfavorable

Since the Actual rate is higher than the standard rate, the variance is Unfavorable.

Hence the correct answer is $ 8,960 Unfavorable

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Direct Labor Efficiency Variance= (Actual Hours * Standard Rate ) - ( Standard Hours * Standard Rate)

= ( 22400* $ 15.00)- (7600 units * 3 Hours * $ 15.00)

= $ 336,000- $ 342,000

= $ 6,000 Favorable

Since the Actual hours is less than the standard hours, the variance is favorable.

Hence the correct answer is $ 6,000 Favorable