Homework Answers
Ans :
Standard hours (SH) = 5 hours
Standard rate (SR) = $ 16.5 per hour
Actual rate (AR) = ?
Actual hours (AH) = 2470
Total wages paid = $ 43,225
Actual output (AO) = 500 returns
(1) Actual rate = Total wages paid / actual hours
= $ 43,225 / 2470 hours
= $ 17.5 per hour
(2)
Labor rate variance = standard cost for actual hours – actual cost
= SR*AH – AH*AR
= 16.5 * 2470 - 2470 * 17.5
= $ 40,755 - $ 43,225
= - 2470 or 2470 adverse
(3) Labor efficiency variance = Standard cost for actual production/ output - standard cost for actual hours
= SR*SH*AO – SR*AH
= 16.5 * 5 * 500 - 16.5 *2470
= $ 41,250 - $ 40,755
= 495 favorable.
(4) Labor rate variance is because the actual rate is more than the standard rate which is causing the adverse variance and efficiency variance is favorable as less actual hours are worked compared to standard hours.
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