Question

PAT. LO 8.3 Ellis Company's labor information for September is as follows: Direct labor hourly rate paid Total standard direct labor hours for units produced Direct labor hours worked Direct labor rate variance $ 32.00 11,000 10,850 $8,137.50 (favorable) A. Compute the standard direct labor rate per hour. B. Compute the direct labor time variance. C. Compute the standard direct labor rate if the direct labor rate variance was $2.712.50 (unfavorable).

Answer 1

Solution:

a. Standard Direct Labor rate pr Hour

Direct labor Rate Variance= (Standard rate - Actual rate) * Actual Hours

$8,137.50 = (Standard Rate - $32)* 10,850

Standard Rate = ($8137.50 + 347,200) / 10,850 hrs

= $ 355,337.50 / 10,850 hrs

= $32.75

b.Labor Time Variance:

Direct Labor Time Variance = ( Stnd hours  allowed - Actual hours worked ) * Std. rate

= ( 11,000 - 10,850) * $32.75

=150 hrs * $32.75

=$ 4912.50 (Favorable)

c.

Direct labor Rate Variance= (Standard rate - Actual rate) * Actual Hours

-$2712,50 = (Standard Rate - $32)* 10,850

Standard Rate = (-$2712.50 + $347,200) / 10,850 hrs

= $ 344,487.50 /10,850 Hrs

= $31.75