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20 June, 22:04

The following labor standards have been established for a particular product:Standard labor hours per unit of output 4.4 hoursStandard labor rate $ 20.20 per hourThe following data pertain to operations concerning the product for the last month:Actual hours worked 7,000 hoursActual total labor cost $ 142,100Actual 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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  1. 21 June, 00:19
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    Direct labor rate variance = $700 unfavorable

    Direct labor time (efficiency) variance = $8,080 unfavorable

    Explanation:

    Giving the following information:

    Standard labor hours per unit of output 4.4 hours

    Standard labor rate $20.20 per hour

    Actual hours worked 7,000 hours

    Actual total labor cost $142,100

    Actual output of 1,500 units

    To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

    Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

    Actual rate = 142,100/7,000 = $20.3

    Direct labor rate variance = (20.2 - 20.3) * 7,000

    Direct labor rate variance = $700 unfavorable

    Direct labor time (efficiency) variance = (Standard Quantity - Actual Quantity) * standard rate

    Standard quantity = 1,500*4.4 = 6,600

    Direct labor time (efficiency) variance = (6,600 - 7,000) * 20.2

    Direct labor time (efficiency) variance = $8,080 unfavorable
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