Direct Labor Variances Assume that Nortel manufactures specialty electronic circ

Question

Direct Labor Variances

Assume that Nortel manufactures specialty electronic circuitry through a unique photoelectronic process. One of the primary products, Model ZX40, has a standard labor time of 0.5 hour and a standard labor rate of $15.00 per hour. During February, the following activities pertaining to direct labor for ZX40 were recorded:

(a) Determine the labor rate variance. $Answer

F

U

(b) Determine the labor efficiency variance. $Answer

F

U

(c) Determine the total flexible budget labor cost variance. $Answer

F

U

Direct labor hours used 5,180 Direct labor cost $67,000 Units of ZX40 manufactured 9,600

Explanation / Answer

Answer to A

Answert to C

Total labor cost variance = labor rate variance + labor efficiency variance

= 10700 - 5700

= 5000 Fav

Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours                                                        = [15 - 12.93] x 5180                                                              = 10700 Fav Actual labor Price Per hour = Total Cost / total hours                                                                  = 67000 / 5180                                                                  = 12.93 per hour Answer to B Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate                                                              = [0.5 x 9600 - 5180] x 15.00                                                              = 5700 Unfav

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