The Greeson Clothes Company produced 25,000 units during June of the current yea

Question

The Greeson Clothes Company produced 25,000 units during June of the current year. The Cutting Department used 6,380 direct labor hours at an actual rate of $10.90 per hour. The Sewing Department used 9,875 direct labor hours at an actual rate of $11.12 per hour. Assume there were no work in process inventories in either department at the beginning or end of the month. The standard labor rate is $11.00. The standard labor time for the Cutting and Sewing departments is 0.25 hour and 0.4 hour per unit, respectively.

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

Explanation / Answer

Please find the detailed answer as follows:

Cutting Department:

Rate Variance = Actual Hours *(Actual Rate - Standard Rate)

= 6380*(10.90 - 11)

= 638 (Favorable)

Time Variance = Standard Rate*(Actual Hours - Standard Hours)

= 11*(6380 - 25000*.25)

= 1430 (Unfavorable)

Total direct labor cost variance = Rate Variance + Time Variance

= 638 - 1430

= -792 (Unfavorable)

Sewing Department:

Rate Variance = Actual Hours *(Actual Rate - Standard Rate)

= 9875 * (11.12 - 11)

= -1185 (Unfavorable)

Time Variance = Standard Rate*(Actual Hours - Standard Hours)

= 11*(9875 - 25000*.40)

= 1375 (Favorable)

Total direct labor cost variance = Rate Variance + Time Variance

= -1185 + 1375

= 190 (Favorable)

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