Direct Labor Variances The following data relate to labor cost for production of

Question

Direct Labor Variances

The following data relate to labor cost for production of 4,000 cellular telephones:

a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. The employees may have been less experienced or poorly trained, thereby resulting in a Select higherlower labor rate than planned. The lower level of experience or training may have resulted in Select morelessefficient performance. Thus, the actual time required was Select moreless than standard.

Actual: 2,630 hrs. at $13.70 $36,031 Standard: 2,670 hrs. at $13.50 $36,045

Explanation / Answer

a.

Rate variance = ( $13.50 - $13.70) x 2,630 = $ 526 U

Time variance = ( 2,670 - 2,630) x $ 13.50 = $ 540 F

b. I do not understand this part of the question. Labor rate variance is not due to skill or efficiency levels of workers, but due to higher hourly rates paid to them as compared to standard.

Rate variance $ 526 Unfavorable Time variance $ 540 Favorable Total direct labor cost variance $ 14 Favorable

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