After evaluating Null Company\'s manufacturing process, management decides to es

Question

After evaluating Null Company's manufacturing process, management decides to establish standards of 3 hours of direct labor per unit of product and $15.90 per hour for the labor rate. During October, the company uses 19,100 hours of direct labor at a $307,510 total cost to produce 6,500 units of product. In November, the company uses 21,400 hours of direct labor at a $346,680 total cost to produce 6,800 units of product. 1) Compute the rate variance, the efficiency variance, and the total direct labor cost variance for each of these two months. October Actual Cost Standard Cost AH AR SR $15.90 AH X SR SH X

Explanation / Answer

Answers

Actual DATA for

6500

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct labor

19100

$              16.10

$       3,07,510.00

Standard DATA for

6500

units

Quantity (SQ)

Rate (SR)

Standard Cost

Direct labor

19500

$              15.90

$       3,10,050.00

Labor Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$               15.90

-

$               16.10

)

x

19100

-3820

Variance

3820

Unfavourable-U

Labour Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

19500

-

19100

)

x

$                        15.90

6360

Variance

6360

Favourable-F

Labor Spending Variance

(

Standard Cost

-

Actual Cost

)

(

$   3,10,050.00

-

$   3,07,510.00

)

2540

Variance

2540

Favourable-F

Actual DATA for

6800

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct labor

21400

$              16.20

$       3,46,680.00

Standard DATA for

6800

units

Quantity (SQ)

Rate (SR)

Standard Cost

Direct labor

20400

$              15.90

$       3,24,360.00

Labor Rate Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Labor Hours

(

$               15.90

-

$               16.20

)

x

21400

-6420

Variance

6420

Unfavourable-U

Labour Efficiency Variance

(

Standard Hours

-

Actual Hours

)

x

Standard Rate

(

20400

-

21400

)

x

$                        15.90

-15900

Variance

15900

Unfavourable-U

Labor Spending Variance

(

Standard Cost

-

Actual Cost

)

(

$   3,24,360.00

-

$   3,46,680.00

)

-22320

Variance

22320

Unfavourable-U

Actual DATA for

6500

units

Quantity (AQ)

Rate (AR)

Actual Cost

Direct labor

19100

$              16.10

$       3,07,510.00

Standard DATA for

6500

units

Quantity (SQ)

Rate (SR)

Standard Cost

Direct labor

19500

$              15.90

$       3,10,050.00

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