2. Madden Corporation manufactures t-shirts, which is its only product. The stan

ID: 2421283 • Letter: 2

Question

2. Madden Corporation manufactures t-shirts, which is its only product. The standards for t-shirts are as follows:

Standard direct labor cost per hour

$17

Standard direct labor hours per t-shirt

0.6

During the month of January, the company produced 1,250 t-shirts. Related production data for the month is as follows:

Actual direct labor hours

770

Actual direct labor cost incurred

$13,000

2a. What is the direct labor rate variance for the month? Is it favorable or unfavorable?

2b. What is the direct labor efficiency variance for the month? Is it favorable or unfavorable?

Standard direct labor cost per hour

$17

Standard direct labor hours per t-shirt

0.6

2a. direct labor rate variance = actual hour * actual rate - actual hour * standard rate

= 13000 - (770 * $17)

= 13000 - 13090

= ($90) favorable

Note:- actual hour * actual rate =Actual direct labour cost

2b. direct labor efficiency variance = (actual hour - standard hour ) * standard hour rate

= ( 770 - 750 ) *$17

= 20 * $17

=$340 { unfavorable}

Note:- standard hour in actual production = 0.6 hour per unit * 1250 unit

=750 hour

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