Europa Company manufactures only one product. Presented below is direct labor in

Question

Europa Company manufactures only one product. Presented below is direct labor information for November. Standard direct labor hours per unit of product 3.20 Number of finished units produced 6,370 Standard wage rate per direct labor hour (SP) $18.90 Total direct labor payroll for the period $351,761 Actual wage rate per direct labor hour worked (AP) $15.00 The labor rate variance in November for the output produced is: $33,497 favorable $91,458 favorable $91,458 unfavorable $92,458 favorable $57,961 unfavorable Europa Company manufactures only one product. Presented below is direct labor information for November. Standard direct labor hours per unit of product 3.20 Number of finished units produced 6,370 Standard wage rate per direct labor hour (SP) $18.90 Total direct labor payroll for the period $351,761 Actual wage rate per direct labor hour worked (AP) $15.00 The labor rate variance in November for the output produced is: $33,497 favorable $91,458 favorable $91,458 unfavorable $92,458 favorable $57,961 unfavorable

Explanation / Answer

Total Direct Payroll for the period (Actual Labour Cost) =Actual wages rate per hour( AR) * Actual Hour paid for (AH)    or, $351761 = $15 * Actual Hour Paid for (AH)

or, Actual hour paid for (AH) = $ 351761/15

= 23450.73

Labour rate variance = Standard cost of Actual time - Actual cost

= Standard wages rate per hour (SR) * Actual hour paid for (AH) - Actual Labour Cost

= $18.90 * 23450.73 - $351761

= $ 91458 (favourable)

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