Question

Direct Labor Variances The following data relate to labor cost for production of 5,300 cellular telephones: Actual: 3,560 hrs. at $13 Standard: 3,500 hrs. at $13.3 a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

The employees may have been less-experienced or poorly trained, thereby resulting in a (higher/lower) labor rate than planned. The lower level of experience or training may have resulted in (more/less) efficient performance. Thus, the actual time required was (more/less) than standard.

Answer 1

• Requirement ‘a’

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     13.30	-	$                    13.00	)	x	3560
	1068
	Variance		$              1,068.00			Favourable-F

Labour Time Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3500	-	3560	)	x	$                        13.30
	-798
	Variance		$                 798.00			Unfavourable-U

Labor Cost Variance
(	Standard Cost	-	Actual Cost	)
(	$             46,550.00	-	$            46,280.00	)
	270
	Variance		$                  270.00			Favourable-F

• Other Answer

The employees may have been less-experienced or poorly trained, thereby resulting in a lower labor rate than planned. The lower level of experience or training may have resulted in less efficient performance. Thus, the actual time required was more than standard.