Assume that Nortel manufactures specialty electronic circuitry though a unique p

Question

Assume that Nortel manufactures specialty electronic circuitry though a unique photoelectric process. One of the primary products, Model ZX40, has a standard labor time of 0.5 hour and a standard labor rate of $13.50 per hour. During February, the following activities pertaining to direct labor for ZX40 were recorded:

Direct labor hours used- 2,180
Direct labor cost- $34,000
Units of ZX40 manufactured- 4,600

Please show all work

a. Determine the labor rate variance
b. Determine the labor efficiency variance
c. Determine the total flexible budget labor cost variance

Explanation / Answer

a. Determine the labor rate variance Actual rate = $34,000/2180 Labor rate variance = actual hours(Actual rate – standard rate = 2180*(34,000/2180 – 13.50) = 4570. Answr: 4570 unfavorable b. Determine the labor efficiency variance standard hours = 4600*.5 = 2300 efficiency variance = standard rate*(actual hours – standard hours = 13.50*(2180 – 2300) = -1620 answer: 1620 favorable c. Determine the total flexible budget labor cost variance total = 4570 - 1620 = 2950 answr: 2950 unfavorable

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