Acme Company’s production budget for August is 17,500 units and includes the fol

Question

Acme Company’s production budget for August is 17,500 units and includes the following component unit costs: direct materials, $8; direct labor, $10; variable overhead, $6. Budgeted fixed overhead is $32,000. Actual production in August was 18,000 units, actual unit component costs incurred during August include direct materials, $8.25; direct labor, $9.45; variable overhead, $6.82. Actual fixed overhead was $33,500, the standard direct labor cost per unit consists of 0.5 hour of labor time at $20 per hour. During August, $170,100 of actual labor cost was incurred for 8,100 direct labor hours.

Calculate the labor rate variance and labor efficiency variance for August.

this is my second time posting this question the first time the answer was incorrect

Explanation / Answer

Labour Rate Variance:

Actual Hours consumed*(Standard Rate- Actual Rate)

= 8100*([20*.5]-9.45)

=8100($10-$9.45)

=$4455 (Favourable)

Labour Effeciency Variance

Standard Rate*(Standard Hours- Actual Hours)

= $20*0.5 ([18000*0.5]-[8100]

=$10*(9000-8100)

= $9000 (Favourable)

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