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Paradise Corp. has determined a standard labor cost per unit of $12 (1 hour * $12 per hour). Last month, Paradise incurred 1,900 direct labor hours for which it paid $21,850. The company also produced and sold 1,950 units during the month. Calculate the direct labor rate, efficiency, and spending variances.

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  1. Today, 10:07
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    Direct Labor Rate Variance = $950

    Direct Labor Efficiency Variance = $600

    Total Direct Labor Spending Variance = $1,550

    Explanation:

    Data provided in the question:

    Standard labor cost per unit = $12

    Direct labor hours = 1,900

    Actual Direct labor paid = $21,850

    Units sold during the month = 1,950

    Standard rate, SR = $12

    Now,

    Actual rate per unit, AR = $21,850 : 1,900

    = $11.5

    Direct Labor Rate Variance = (SR - AR) * Actual hours

    = ($12 - $11.5) * 1900

    = $950 (Favourable)

    Direct Labor Efficiency Variance = (Standard hours - Actual hour) * SR

    = (1950 - 1900) * $12

    = $600 (favourable)

    Total Direct Labor Spending Variance = Standard cost - actual cost

    = (1950 * 12) - 21,850

    = $1,550 (favourable)
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Paradise Corp. has determined a standard labor cost per unit of $12 (1 hour * $12 per hour). Last month, Paradise incurred 1,900 direct labor hours for which it paid $21,850. The company also produced and sold 1,950 units during the month.
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Home » Business » Paradise Corp. has determined a standard labor cost per unit of $12 (1 hour * $12 per hour). Last month, Paradise incurred 1,900 direct labor hours for which it paid $21,850. The company also produced and sold 1,950 units during the month.
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