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2 July, 18:21

Bellingham Company produces a product that requires 6 standard direct labor hours per unit at a standard hourly rate of $22.00 per hour. If 4,800 units used 27,600 hours at an hourly rate of $22.44 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

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  1. 2 July, 18:45
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    The correct answer for (a) is 12,144 (Favorable), (b) is 26,400 (Unfavorable), and (c) is 14,256 (unfavorable).

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    (a) We can calculate the rate variance by using following formula:

    Rate variance = Actual hours * (Standard rate - Actual rate)

    = 27,600 * ($22 - $22.44)

    = - $12,144 (Favorable)

    (b). We can calculate the time variance by using following formula:

    Time variance = Standard rate * (Standard hours - Actual hours)

    = $22 * (6 * 4,800 - 27,600)

    = 26,400 (Unfavorable)

    (c). We can calculate the cost variance by using following formula:

    Cost variance = Time variance - rate variance

    = 26,400 - 12,144

    = 14,256 (unfavorable)
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