Acme Company\'s production budget for August is 23,000 units and includes the fo

Question

Acme Company's production budget for August is 23,000 units and includes the following component unit costs: direct materials, $9.00; direct labor, S11.00: variable overhead, S5.80. Budgeted fixed overhead is $49,000. Actual production in August was 24,075 units. Actual unit component costs incurred during August include direct materials, $10.00, direct labor, $10.00 variable overhead, $6.80. Actual fixed overhead was $52,200. The standard direct labor cost per unit consists or 0.5 hour of labor time at $22 per hour. During August, $240,750 of actual labor cost was incurred for 9,630 direct labor hours. Required: Calculate the labor rate variance and labor efficiency variance for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.) Labor rate variance Labor efficiency variance $(34,632) $ 58,905 x U

Explanation / Answer

Labour rate variance = (Standard rate-actual rate)Actual hours

                                    = (22*9630-240750)

Labour rate variance = 28890 U

Labour efficiency variance = (Standard hour-actual hour)Standard rate

                                            = (24075*.50-9630)*22

Labour efficiency vaariance = 52965 F

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