Question

Required information (The following information applies to the questions displayed below.) A manufactured product has the following information for June. Direct materials Direct labor Overhead Units manufactured Standard (6 lbs. $7 per lb.) (3 hrs. $17 per hr.) (3 hrs. @ $12 per hr.) Actual 50, 200 lbs. @ $7.10 per lb. 24,600 hrs. @ $17.50 per hr. $304,000 8,300 Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable. AH - Actual Hours SH Standard Hours AR - Actual Rate SR - Standard Rate Actual Cost Standard Cost

Answer 1

Direct labor rate variance = Actual hours worked*standard rate - Actual hours worked*actual rate

Direct labor rate variance = 24,600*$17 - 24,600*$17.5

Direct labor rate variance = $418,200 - $430,500 = $12,300 Unfavorable

Direct labor efficiency variance = Standard hours*standard rate - Actual hours worked*standard rate

Standard hours = 8,300*3 = 24,900 hours

Direct labor efficiency variance = 24,900*$17 - 24,600*$17

Direct labor efficiency variance = $423,300 - $418,200 = $5,100 Favorable

AH*AR AH*SR SH*SR

24,600*$17.5 24,600*$17 24,900*$17

$430,500 $418,200 $423,300

$12,300 Unfavorable $5,100 Favorable

Direct labor rate variance Direct labor efficiency variance