Delmar Inc. uses a standard cost system. Labor standards are 2.1 hours per widge

Question

Delmar Inc. uses a standard cost system. Labor standards are 2.1 hours per widget at $9.10 per hour. During August, Delmar Inc. paid its workers $154,040 for 16,700 hours. Delmar Inc. produced 8,600 widgets during August a. Calculate the direct labor rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect i.e., zero variance).) Rate Variance b. Calculate the direct labor efficiency variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).) Efficiency Variance

Explanation / Answer

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

= ($9.22 - $9.10) * 16700 hours

= $2004 unfavourable.

Direct labor efficiency variance = (actual hours - standard hours) * standard rate

= (16700 hours - 18060 hours) * $9.10

= ($12376) favourable.

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