Delmar Inc. uses a standard cost system. Labor standards are 2.1 hours per widge

Question

Delmar Inc. uses a standard cost system. Labor standards are 2.1 hours per widget at $9.40 per hour. During August, Delmar Inc. paid its workers $156,170 for 16,400 hours. Delmar Inc. produced 8,600 widgets during August.

Calculate the direct labor rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Calculate the direct labor efficiency variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Delmar Inc. uses a standard cost system. Labor standards are 2.1 hours per widget at $9.40 per hour. During August, Delmar Inc. paid its workers $156,170 for 16,400 hours. Delmar Inc. produced 8,600 widgets during August.

Explanation / Answer

Labour Rate Variance = ( Standard Rate- Actual Rate) Actual Hours (9.40-156170/16400)*16400 (9.40-9.522)*16400 0.122*16400 ($2,010) Labour Rate Variance is -$ 2010 Labour Efficiency variance = ( Standard Hours- Actual Hours) Standard Rate (8600*2.1-16400)*9.40 (18060-16400)9.4 $15,604 Labour Efficiency variance is $ 15604

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