A company has a standard of 2 hours of direct labor per unit produced and $18 pe

Question

A company has a standard of 2 hours of direct labor per unit produced and $18 per hour for the labor rate. During last period, the company used 9,500 hours of direct labor at a $152,000 total cost to produce 4,000 units. Compute the direct labor rate and efficiency variances.
Rate Variance: $19,000 unfavorable; Efficiency Variance: $27,000 favorable.
Rate Variance: $63,829 unfavorable; Efficiency Variance: $99,000 unfavorable.
Rate Variance: $152,000 favorable; Efficiency Variance: $99,000 unfavorable.
Rate Variance: $19,000 favorable; Efficiency Variance: $27,000 unfavorable.
Rate Variance: $152,000 unfavorable; Efficiency Variance: $99,000 favorable.

Explanation / Answer

at standard rate of 18 $, cost = 9500*18 = $ 171,000
actual = $152,000

rate variance = 171,000 - 152,000 = 19000
since the actual cost is less, therefore favorable
Rate Variance: $19,000 favorable.

to produce 4000 units, time as per standard rate = 4000*2= 8000 hrs
actual time = 9500 hrs
efficiency variance = (9500-8000)*standard rate
= 1500*18 = 27000
since actual time is greater, therefore unfavorable
Efficiency Variance: $27,000 unfavorable

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