Johnson, Inc. manufactures lead crystal glasses. The standard direct labor time

Question

Johnson, Inc. manufactures lead crystal glasses. The standard direct labor time is 0.2 hour per glass, at a cost of $16 per hour. The actual results for one month's production of 6,500 glasses were 0.4 hours per glass, at a cost of $11 per hour. Calculate the direct labor cost variance and the direct labor efficiency variance. Select the formula, then enter the amounts and compute the cost variance for direct labor and identify whether the variance is favorable (F) or unfavorable (U). Direct Labor Cost = Variance Select the formula, then enter the amounts and compute the efficiency variance for direct labor and F) or unfavorable (U). Direct Labor Efficiency = Variance

Explanation / Answer

Direct labour cost variance = (Standard rate - Actual rate) * Actual hours

= (16 - 11) * (6,500 * 0.4)

= 13,000 Favourable.

Direct labour efficiency variance = (Standard hours - Actual hours) * Standard rate

= [(6,500 * 0.2) - (6,500 * 0.4)] * 16

= (1,300 - 2,600) * 16

= 20,800 Unfavourable.

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