QS 21-11 Direct labor variances LO P2 The following information describes a comp

Question

QS 21-11 Direct labor variances LO P2 The following information describes a company's usage of direct labor in a recent period Actual direct labor hours used (AH) Actual direct labor rate per hour (AR) Standard direct labor rate per hour (SR) Standard direct labor hours for units produced 65,000 $ 15 $14 67,000 (SH) Compute the direct labor rate and efficiency variances for the period Actual Cost Standard Cost AH AR AH SR SH SR AR Direct labor rate variance Direct labor efficiency variance Total direct labor variance 0 Favorable 0 Favorable Favorable

Explanation / Answer

AH x AR AH x SR SH X SR

65,000   x 15 65,000 x 14 67,000    x 14

=$975,000 =$910,000                                                            =$938,000

Direct Labor Rate Variance (   AHSR – AHAR )   = $910,000- $975,000= - $ 65,000 U

Direct Labor Efficiency Variance                (   SHSR – AHSR )   = $938,000- $910,000= - $ 28,000 F

Total Direct Labor Variance (   SHSR – AHAR )   = $938,000- $975,000= - $ 37,000 U

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