Acme Company\'s production budget for August is 17,500 units and includes the fo

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, $8. 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. Required: Calculate the labor rate variance and labor efficiency variance for August.

Explanation / Answer

Direct Labour Rate Variance ( Standard Rate- Actual Rate per Hour) Actual Hours (8./.5-9.45/.5)18000*.5 (16-18.9)9000 - 26100 Labour Rate Variance is 26100 Unfavourable

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