Direct Labor Variances The following data relate to labor cost for production of

Question

Direct Labor Variances

The following data relate to labor cost for production of 6,900 cellular telephones:

a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. The employees may have been less-experienced or poorly trained, thereby resulting in a labor rate than planned. The lower level of experience or training may have resulted in efficient performance. Thus, the actual time required was than standard.

Explanation / Answer

Rate variance: Direct labor rate variance =(Actual rate - Standard rate)*Actual hour
=(12.6-12.9)*4670=-1401
Time variance = (std. time - act. time)*actual rate
=(4600-4670)*12.6
=882
Total director labour cost variance=882-1401=519

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