The following data relate to labor cost for production of 12,500 cellular teleph

Question

The following data relate to labor cost for production of 12,500 cellular telephones:

Actual: 13,600 hours at $16.15 $219,640
Standard: 13,725 hours at $16.00 $219,600

a. Determine the rate varaince, time variance, and total direct labor variance.
b. Discuss what might have caused these variances.

Explanation / Answer

a) rate variance = act. hrs (std. rate - act. rate) = 13600(16 - 16.15) = -2040 => = 2040 ($) unfavorable time variance = (std. time - act. time)/Q = (13725 - 13600)/12500 = 0.01 hrs. (favorable) Total direct labor variance = std. labor cost - act. labor cost =219600 - 219640 = - 40 $ (unfavorable) b) These variances occured because actul values differed from the standard values.

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