Acme Company\'s production budget for August is 17.900 units and includes the fo

Question

Acme Company's production budget for August is 17.900 units and includes the following component unit costs: direct materials. $8.00: direct labor. $10.40; variable overhead. $6.00. Budgeted fixed overhead is $36,000. Actual production in August was 18,135 units, actual unit component costs incurred during August include direct materials. $8.20; direct labor. $9.80; variable overhead, $7.20. Actual fixed overhead was $37,900. the standard direct labor cost per unit consists of 0.5 hour of labor time at $20.8 per hour. During August, $177,723 of actual labor cost was incurred for 8,190 direct labor hours. Required: Calculate the labor rate variance and labor efficiency variance for August. (Indicate the effect of each variance by selecting "F" for favorable. "U" for unfavorable.)

Explanation / Answer

formula of labour rate variance= Actual Quantity x Actual Rate - Actual Quantity x Standard Rate

=((18135*25.2)+37900)-((18135*24.40)+36000)

=494902-478494

+$16408F

Formula of labour effiency varriance

Actual Hours x Standard Rate -Standard Hours x Standard Rate

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