Company\'s production budget for August is 18,600 units and includes the followi

Question

Company's production budget for August is 18,600 units and includes the following component unit direct materials, $8.00; direct labor, $11.50; variable overhead, $5.00. Budgeted fixed overhead is Actual production in August was 19,998 units, actual unit component costs incurred during August Include direct materials, $10.00; direct labor, $10,50; variable overhead, $6.00. Actual fixed overhead was the standard direct labor cost per unit consists of 0.5 hour of labor time at $23.0 per hour. During $209,979 of actual labor cost was incurred for 9,090 direct labor hours. Claculte the labor rate variance and labor efficiency variance foe August. (Indicate the effect of each Variance by selecting ''F'' for favorable, ''U'' for unfavorable.)

Explanation / Answer

labor rate vairance = ( Standard rate - Actual rate per hour ) Actual hours

                                = ($23.00 *9090 - $209,979

                               = $209,070 - $209,979

                              = $909(U)

Efficiency varaince = ( Std hrs allowed - Actual hrs ) Std rate

Std hrs allowed = .5 hours * 19,998 = 9999hrs

                             = (9999 - 9090) 23

                          = 20907(F)

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