Paradise Corp. has determined a standard labor cost per unit of $10.20 (1 hour ×

Question

Paradise Corp. has determined a standard labor cost per unit of $10.20 (1 hour × $10.20 per hour). Last month, Paradise incurred 1,650 direct labor hours for which it paid $16,005. The company also produced and sold 1,700 units during the month.

Calculate the direct labor rate, efficiency, and spending variances. (Round your intermediate calculations to 2 decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)

Direct Labor Rate Variance Direct Labor Efficiency Variance Total Direct Labor Spending Variance

Explanation / Answer

Direct Labor Rate Variance = ( SR - AR ) * Actual hours

( 10.20 - [ 16005 / 1650 ] ) * 1650

( 10.20 - 9.7 ) * 1650 = $ 825 ( Favourable )

Direct Labor Efficiency Variance = ( SH allowed - AH ) * SR

( 1700 * 1 - 1650 ) * 10.20 = $ 510 ( favourable )

Total Direct Labor Spending Variance = Standard cost - actual cost

( 1700 * 10.20 ) - 16005 =

$ 1335 ( fav. )

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