The following labor standards have been established for a particular product:Standard labor hours per unit of output 4.3 hoursStandard labor rate $ 20.10 per hourThe following data pertain to operations concerning the product for the last month:Actual hours worked 6,900 hoursActual total labor cost $ 139,380Actual output 1,500 unitsRequired:a. What is the labor rate variance for the month? b. What is the labor efficiency variance for the month?

Question

Business

Braxton Brady

4 December, 21:15

The following labor standards have been established for a particular product:Standard labor hours per unit of output 4.3 hoursStandard labor rate $ 20.10 per hourThe following data pertain to operations concerning the product for the last month:Actual hours worked 6,900 hoursActual total labor cost $ 139,380Actual output 1,500 unitsRequired:a. What is the labor rate variance for the month? b. What is the labor efficiency variance for the month?

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Answers (1)

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Conrad Bender · Answer 1

Answer: 1. $690 (favorable)

2. $9045 (favorable)

Explanation: These can be computed as follows : -

Labor rate variance = Actual labor cost - (standard rate * actual hours)

= $139,380 - ($20.1 * 6900 hours)

= $690 (favorable)

.

Labor efficiency variance = (Actual hours - standard hours) * (standard rate)

= [6900 hours - (1500 units * 4.3 hours) ] * ($20.1)

= $9045 (favorable)