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 3 hours of direct labor per unit of product and $16.20 per hour for the labor rate. During October, the company uses 20,000 hours of direct labor at a $328,000 total cost to produce 6,800 units of product. In November, the company uses 23,200 hours of direct labor at a $382,800 total cost to produce 7,200 units of product.

Compute the direct labor rate variance, the direct labor 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 3 hours of direct labor per unit of product and $16.20 per hour for the labor rate. During October, the company uses 20,000 hours of direct labor at a $328,000 total cost to produce 6,800 units of product. In November, the company uses 23,200 hours of direct labor at a $382,800 total cost to produce 7,200 units of product.

Explanation / Answer

Satandard Labor cost details per unit Direct Labor Hrs Direct Labor Rate /Hr Standard Labor cost/Unit Standard Labor per unit                          3.00               16.20              48.60 Details Units Actual Labor Hrs Actual Cost Actual Labor Rate Std Hrs for Actual output Std Cost for Actual Output October details                     6,800             20,000          328,000           16.40         20,400        330,480 November details                     7,200             23,200          382,800           16.50         21,600        349,920 Labor Variance October   Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate) =20000*(16.40-16.20)                     4,000 (U) Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output)   =16.20*(20000-20400)                     6,480 (F) Total Direct Labor Variance =Actual Labor Cost - Std Labor Cost for actual output    =328000-330480=                     2,480 (F) Labor Variance November Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate)    =23200*(16.5-16.20)                     6,960 (U) Direct LAbor Efficiency Variance =Std Rate ( Actual Hrs used-Std Hrs for actual output)   =16.20*(23200-21600)                   25,920 (U) Total Direct Labor Variance =Actual Labor Cost - Std Labor Cost for actual output    =382800-349920                   32,880 (U)

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