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15 December, 06:22

Paradise Corp. has determined a standard labor cost per unit of $10.20 (1 hour * $10.20 per hour). Last month, Paradise incurred 1,650 direct labor hours for which it paid $16,005. The company also produced and sold 1,700 units during the month.

Calculate the direct labor rate, efficiency, and spending variances. (Round your intermediate calculations to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Direct Labor Rate Variance

Direct Labor Efficiency Variance

Total Direct Labor Spending Variance

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Answers (1)
  1. 15 December, 09:36
    0
    Direct Labor Rate Variance = $825 favorable

    Direct Labor Efficiency Variance = $510 favorable

    Total Direct Labor Spending Variance = $1,335 favorable

    Explanation:

    The computations are shown below:

    Direct Labor Rate Variance

    = (Standard rate - Actual rate) * Actual hours

    = ($10.20 - $16,005 : 1,650 labor hours) * 1,650 direct labor hours

    = ($10.20 - $9.7) * 1,650 direct labor hours

    = $825 favorable

    Direct Labor Efficiency Variance

    = (Standard Hours allowed - Actual hours) * Standard rate

    = (1,700 units * 1 hour - 1,650 hours) * $10.20

    = (1,700 hours - 1,650 hours) * $10.20

    = $510 favorable

    Total Direct Labor Spending Variance

    = Standard cost - actual cost

    = 1,700 hours * $10.20 - $16,005

    = $17,340 - $16,005

    = $1,335 favorable
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