Marv Company\'s direct labor costs for manufacturing its only product were as fo

Question

Marv Company's direct labor costs for manufacturing its only product were as follows for October:

1. The direct labor efficiency variance for October was:

2. The direct labor rate variance for October was:

3. The total direct labor variance for October was:

Standard direct labor hours per unit of product 2 Budgeted finished units for the period 6,000 Number of finished units produced 5,000 Standard rate per direct labor hour (SP) $20 Direct labor costs incurred $207,000 Actual wage rate per direct labor hour (AP) $18

Explanation / Answer

1). Direct labour efficiency variance = (Std hrs for actual prodution - Actual hrs)* Std rate per hour
= (5000 units * 2 - 11500 hrs) * $20 per hr
= (10000 hrs - 11500 hrs) * 20 = 30000 U
Actual hrs = 207000/ 18 = 11500 hrs

2). Diret labour rate variance = (Std rate - Actual rate)* Actual hrs
= (20 - 18) * 11500 hrs = 23000 F

3). Total direct labour variance = Std labour cost for actual production - Actual labour cost
=(5000units *2 hrs* $20 per hr) - $207000 = 7000 U

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