Oriole Family Instruments makes cellos. During the past year, the company made 6,630 cellos even though the budget planned for only 5,780. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 24,840 direct labor hours were worked.

Required:

Calculate the direct labor rate and efficiency variances.

Question

Business

Gizmo

13 December, 18:00

Oriole Family Instruments makes cellos. During the past year, the company made 6,630 cellos even though the budget planned for only 5,780. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 24,840 direct labor hours were worked.

Required:

Calculate the direct labor rate and efficiency variances.

+5

Answers (1)

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Zayden Ortiz · Answer 1

Direct Labor rate Variance $ 24840 Unfavorable

Labor Efficiency Variance $23520 favorable

Explanation:

Direct Labor rate Variance = Actual Hours * Actual Rate - Actual Hour * Standard Rate

Direct Labor rate Variance = 24840*15 - 24840*14

= 372600 - 347760

= $ 24840 Unfavorable

Labor Efficiency Variance = Actual Hours * Standard Rate - Standard Hour * Standard Rate

Labor Efficiency Variance = 24840*14 - 4*6630*14

= 24840*14 - 26520*14

= 347760 - 371280 = $23520 favorable