The standard direct labor cost per unit for a company was $14.00 (= $28 per hour

Question

The standard direct labor cost per unit for a company was $14.00 (= $28 per hour × 0.5 hours per unit). During the period, actual direct labor costs amounted to $86,000, 2,800 labor-hours were worked, and 6,600 units were produced.

Required: Compute the direct labor price and efficiency variances for the period. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

price variance and efficiency variance are needed :)

Explanation / Answer

Pirce variance = Actual cost - Standerd cost of actual hours

= $86,000 - (2,800*28) = 7,600 U

Direct labour efficeincy variance = (Actual Hours*Standard Rate) - (Standard Hours * Standard Rate)

= (2,800*28)-((6,600*0.5)*28) = 14,000 F

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