The following labor standards have been established for a particular product: St
ID: 2519464 • Letter: T
Question
The following labor standards have been established for a particular product:
Standard labor hours per unit of output……………………. 0.5 HOURS
Standard labor rate…………………………….…………………..$15.00 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked…………………………………..……… 2,500 hours A
ctual total labor cost……………………………………..……….$35,000
Actual output……………………………………………………....4,000 units
HINT: Make a “goalpost” like we did in class to answer the following questions. Make sure to indicate if your variance is favorable or unfavorable.
a. What is the total direct labor variance for the month?
b. What is the direct labor rate variance for the month?
c. What is the direct labor efficiency variance for the month?
Explanation / Answer
a.
Total direct labour variance for the month = Actual labour cost - (standard hours * standard rate)
= 35,000 - [(4,000*0.5) * 15]
= 35,000 - 30,000
= 5,000 Unfavourable.
b.
Direct labour rate variance for the month = Actual hours * (actual rate - standard rate)
= 2,500 * [(35,000/2,500) - 15]
= 2,500 * (14-15)
= 2,500 Favourable.
c.
Direct labour efficiency variance = Standard rate * (actual hours - standard hours)
= 15 * [2,500 - (4,000*0.5)]
= 15 * (2,500 - 2,000)
= 7,500 Unfavourable.
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