Eastern Polymers, Inc., processes a base chemical into plastic. Standard costs a

Question

Eastern Polymers, Inc., processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 7,200 units of product were as follows: Standard Costs Actual Costs Direct materials 10,100 lbs. at $4.90 10,000 lbs. at $4.70 Direct labor 1,800 hrs. at $17.30 1,840 hrs. at $17.70 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,880 direct labor hrs.: Variable cost, $4.40 $7,840 variable cost Fixed cost, $7.00 $13,160 fixed cost Each unit requires 0.25 hour of direct labor. b. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Rate variance $

Time variance $

Total direct labor cost variance $

Explanation / Answer

Direct labor rate variance = Actual hours(standard rate - actual rate)

= 1840 hours ($17.30 - $17.70)

= $736 unfavourable

Direct time variance = Standard rate (Standard hours - actual hours)

= $17.30(1800 hours - 1840 hours)

= $692 unfavourable

Total direct labor cost variance = $736 unfavourable + $692 unfavourable

= $1428 unfavourable.

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