Actual: 3,320 hrs. at $14.7 Standard: 3,270 hrs. at $15 Rate variance Time varia

Question

Actual: 3,320 hrs. at $14.7 Standard: 3,270 hrs. at $15 Rate variance Time variance Total direct labor cost variance Unfavorable w Favorable v b. The employees may have been less-experienced or poorly trained, thereby resulting in a lowerlabor rate than planned. The lower level of experience or training may have resulted in less required was morethan standard. Unfavoratio variances can be thought of as increasing costs (3 deon Favorable varances can be tougn of as decreasing costs (a Credn The labor cost variance is the diftference between the actual and standard tabor cost Consider factors affecting labor performance Leaning Objective 3

Explanation / Answer

***Labor rate variance = Actual time x (Actual rate - Standard rate)

= 3,320 hours x ($14.7 - $15)

= $996 (Favorable)

***Labor time variance = Standard rate x (Actual time - Standard time for actual output)

= $15 x (3,320 hours - 3,270 hours)

= $750 (Unfavorable)

***Total Labor cost variance = Labor rate variance + Labor time variance

= $996 (F) + $750 (U)

= $246 (Favorable)

  

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