Lee Maritime Company manufactures special metallic materials and decorative fitt

Question

Lee Maritime Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Lee uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 3 pounds per unit; $4 per pound Direct labor: 5 hours per unit; $15 per hour Lee produced 5,000 units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $378,000. What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

Explanation / Answer

Answer = (A) $ 72,000 F

working notes for the above answer is as under

Lee produce 5000 units during the quarter

Direct materials: 3 pounds per unit;$4 per pound

Direct labor: 5 hours per unit; $15 per hour

Calculation of direct labour cost Variance is as follow

So standered Timing of production of 5,000 units are

= 5,000 units x 5 hour per unit

=25,000 hours

Company actul uses 30,000 direct labour during the quarter

Standered Cost

=30,000 units x 15$ per hour

=$ 450,000

Vrance = Standered cost - actual cost

=$ 450,000 -$ 378,000

=$ 72,000 F

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