After evaluating Null Company’s manufacturing process, management decides to est

Question

After evaluating Null Company’s manufacturing process, management decides to establish standards of 2 hours of direct labor per unit of product and $15.30 per hour for the labor rate. During October, the company uses 11,100 hours of direct labor at a $172,050 total cost to produce 5,900 units of product. In November, the company uses 22,300 hours of direct labor at a $347,880 total cost to produce 6,300 units of product.

Compute the rate variance, the efficiency variance, and the total direct labor cost variance for each of these two months.

After evaluating Null Company’s manufacturing process, management decides to establish standards of 2 hours of direct labor per unit of product and $15.30 per hour for the labor rate. During October, the company uses 11,100 hours of direct labor at a $172,050 total cost to produce 5,900 units of product. In November, the company uses 22,300 hours of direct labor at a $347,880 total cost to produce 6,300 units of product.

Explanation / Answer

Particulars Standard Actual Hours Rate amount Hours Rate amount Labour - October            11,800.00                    15.30         180,540.00            11,100.00                    15.50         172,050.00 Labour - November            12,600.00                    15.30         192,780.00            22,300.00                    15.60         347,880.00 Labour Required - Oct = 5900*2            11,800.00 Labour Required - Nov = 6300*2            12,600.00 October DLRV= (SR-AR)AH DLRV= (15.30-15.50)11,100 DLRV= 2,220 U DLEV = (SH-AH)SR DLEV = (11,800-11,100)15.30 DLEV = 10,710 F November DLRV= (SR-AR)AH DLRV= (15.30-15.60)22,300 DLRV= 6,690 U DLEV = (SH-AH)SR DLEV = (12,600-22,300)15.30 DLEV = 148,410 U

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