Question

Direct Labor Variances Bellingham Company produces a product that requires 7 standard direct labor hours per unit at a standard hourly rate of $13.00 per hour. If 2,800 units used 20,400 hours at an hourly rate of $12.74 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 b. Direct labor time variance c. Direct labor cost variance

Answer 1

What is the direct labor (a) rate variance, (b) time variance, and (c) cost variance?
a. Direct labor rate variance	-5,304	Favorable
b. Direct labor time variance	10,400	Unfavorable
c. Direct labor cost variance	5,096	Unfavorable
Explanation:
a. Direct labor rate variance
Direct labor rate variance =	[(Actual Hours x Actual Rate) – (Actual Hours x Standard Rate)]
Direct labor rate variance =	[(20,400 hours × $12.74 per hour) – (20,400 hours × $13.00 per hour)]
Direct labor rate variance =	($259,896 – $265,200)
Direct labor rate variance =	$5,304 favorable
b. Direct labor time variance
Standard hours = (2,800 units x 7 hours per unit) = 19,600 hours
Direct labor time variance =	[(Actual Hours × Standard Rate) – (Standard Hours × Standard Rate)]
Direct labor time variance =	(20,400 hours × $13.00 per hour) – (19,600 hours × $13.00 per hour)]
Direct labor time variance =	($265,200 – $254,800)
Direct labor time variance =	$10,400 unfavorable
c. Direct labor cost variance
Direct labor cost variance =	[(Actual Hours x Actual Rate) – (Standard Hours × Standard Rate)]
Direct labor cost variance =	[(20,400 hours × $12.74 per hour) – (19,600 hours × $13.00 per hour)]
Direct labor cost variance =	($259,896 – $254,800)
Direct labor cost variance =	$5,096 unfavorable

What is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance?
a. Direct materials price variance	18,522	Unfavorable
b. Direct materials quantity variance	-12,600	Favorable
c. Direct materials cost variance	5,922	Unfavorable
Explanation:
a. Direct materials price variance
Direct materials price variance =	[(Actual Quantity x Actual Price) − (Actual Quantity x Standard Price)]
Direct materials price variance =	[(88,200 pounds × $7.21 per pound) − (88,200 pounds × $7.00 per pound)]
Direct materials price variance =	($635,922 − $617,400)
Direct materials price variance =	$18,522 unfavorable
b. Direct materials quantity variance
Standard Quantity Allowed = (6,000 units × 15 pounds per unit) = 90,000 pounds
Direct materials quantity variance   =	[(Actual Quantity × Standard Price) – (Standard Quantity × Standard Price)]
Direct materials quantity variance   =	[(88,200 pounds × $7.00 per pound) – (90,000 pounds × $7.00 per pound)]
Direct materials quantity variance   =	($617,400 – $630,000)
Direct materials quantity variance   =	$12,600 favorable
c. Direct materials cost variance
Direct materials cost variance =	[(Actual Quantity x Actual Price) – (Standard Quantity × Standard Price)]
Direct materials cost variance =	[(88,200 pounds × $7.21 per pound) – (90,000 pounds × $7.00 per pound)]
Direct materials cost variance =	($635,922 – $630,000)
Direct materials cost variance =	$5,922 unfavorable