Question

Longman, Inc. manufactures lead crystal glasses. The standard direct labor time is 0.2 hour per glass, at a cost of $17 per hour. The actual results for one month's production of 7,100 glasses were 0.4 hours per glass, at a cost of $14 per hour. Calculate the direct labor cost variance and the direct labor efficiency variance. Select the formula, then enter the amounts and compute the cost variance for direct labor and identify whether the variance is favorable (F) or unfavorable (U). ( Actual Cost - Standard Cost ) x Actual Quantity - Direct Labor Cost Variance Select the formula, then enter the amounts and compute the efficiency variance for direct labor and identify whether the variance is favorable (F) or unfavorable (U). ( Actual Quantity - Standard Quantity v = Direct Labor Efficiency Variance ) x ) x Actual Cost Actual Quantity Standard Cost Standard Quantity

Answer 1

actual quantity of hours = 7100 x 0.4 = 2840 hours

standard quantity of hours = 7100 x 0.2 = 1420 hours

(A)

Labor cost variance = (actual cost - standard cost) x actual quantity

= 2840 x ($14 - $17)

= $8520 Favorable

(B)

Labor efficiency variance = (actual quantity - standard quantity) x standard cost

= $17 x (2840 - 1420)

= $24140 Unfavorable