Question

Bellingham Company produces a product that requires 2 standard direct labor hours per unit at a standard hourly rate of $21.00 per hour. If 2,700 units used 5,600 hours at an hourly rate of $19.95 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

a. Direct labor rate variance $

b. Direct labor time variance $

c. Direct labor cost variance $

Answer 1

Answer:

(a)

Direct labor rate variance              = Actual hours x ( Standard Rate (-) Actual rate )              = 5,600 x ( $ 21 (-) $ 19.95 )              =    ($ 5,880) Favourable

Direct labor rate variance =     ($ 5,880) Favourable

(b)

Direct labor time variance              = Standard Rate x ( Standard Hours (-) Actual hours )               = $ 21 x ( (2,700 Units x 2 DLH) (-) 5,600)               =   $ 21 x ( 5,400 (-) 5,600 )               =   $ 4,200 Unfavourable

Direct labor time variance   =   $ 4,200 Unfavourable

(c )

Total Direct labor cost variance                  = Direct labor rate variance + Direct labor time variance                   = $ 5,880 (-) $ 4,200                   = ( $ 1,600 ) Favourable

Total Direct labor cost variance   = ( $ 1,680 ) Favourable