The following labor standards have been established for a particular product: Th
ID: 2559129 • Letter: T
Question
The following labor standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
What is the labor rate variance for the month? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
What is the labor efficiency variance for the month? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)
The following labor standards have been established for a particular product:
Explanation / Answer
Part a --- Labor Rate Variance
Labor Price Variance – It arises due to difference in actual rate paid from standard rate. It is calculated as below:
Labor Price Variance = Actual Time (Standard Rate per hour – Actual Rate per hour)
Here, actual time means time for which wage has been paid.
Labor Rate Variance
Actual Hourly Rate (AHR) ($156,000 / 7500)
$20.80
Per Hour
Standard Hourly Rate (SHR)
$20.70
Per Hour
Variance or Difference in Rate
$0.10
Per Hour
x Actual Labor Hours worked
7500
Hours
Labor Rate Variance
$750
Unfavorable
Unfavorable Labor Rate Variance because actual hourly rate paid is higher than standard hourly rate.
Part b ---- Labor Quantity Variance
Labor Efficiency Variance – It arises due to variation in the working hours from the set standard.
Labor Quantity / Efficiency Variance
Standard Hours Allowed for actual production:
Actual Production
1500
Units
x Allowed Standard Hours Per Unit
4.9
hours
Total Standard Hours Allowed for actual production (SHAP)
7350
hours
Actual Labor Hours Worked (AH)
7500
hours
Variance or Difference in Hours (AH - SHAP)
150
hours
x Standard Hourly Rate (SHR)
$20.70
per hour
Labor Efficiency Variance
$3,105
Unfavorable
Unfavorable Labor Efficiency Variance because the Actual Hours Worked is higher than the allowed standard hours at standard rate
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Labor Rate Variance
Actual Hourly Rate (AHR) ($156,000 / 7500)
$20.80
Per Hour
Standard Hourly Rate (SHR)
$20.70
Per Hour
Variance or Difference in Rate
$0.10
Per Hour
x Actual Labor Hours worked
7500
Hours
Labor Rate Variance
$750
Unfavorable
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.