Question

Direct Labor Variances Bellingham Company produces a product that requires 2 standard direct labor hours per unit at a standard hourly rate of $18.00 per hour. If 4,800 units used 9,900 hours at an hourly rate of $17.10 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 Favorable a. Direct labor rate variance 8,910 b. Direct labor time variance $ c. Direct labor cost variance

Answer 1

Answer- Total direct labor cost variance =$3510 Favorable.

Direct Labor rate variance = $8910 Favorable.

Direct Labor Efficiency variance= $5400 Unfavorable.

Explanation- Total direct labor cost variance = Standard cost- Actual cost

= (9600 hours*$18 per hour)- (9900 hours*$17.10 per hour)

= $172800-$169290

= $3510 Favorable

Direct Labor rate variance = (Standard rate – Actual rate) * Actual hours

                                       = ($18.00 per hour – $17.10 per hour)* 9900 hours   

                                       = $8910 Favorable

Direct Labor Efficiency variance=(Standard hours-Actual hours)*Standard rate per hour

                                       =(9600 hours – 9900 hours)*$18.00 per hour

                                          = $5400 Unfavorable

Where- Standard Hours = No. of hours per unit*Actual output

= 2 hours per unit *4800 units

=9600 hours