Question

Direct labor variance

La Batre Bicycle company manufactures commuter bicycles from recycled materials. The following data for july of the current year are available:

Quantity of direct labor used 760 hr

Actual rate for direct labor. $11.2 per hr.

Bicycles completed in April. 360 bicycles

Standard direct labor per bicycle. 2 hrs.

standard rate for direct labor. $11.4 per hr.

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 unfavaroable variance as a positive number:

direct labor rate variance. $. Favorable/unfavorable

direct labor time variance. $. Favorable/Unfavorable

total direct labor Cost Variance. $. Favorable/Unfavorable

b. How much direct labor should be debited to work in process?   

Answer 1

• All working forms part of the answer
• Workings

Actual DATA for		360	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	760	$              11.20	$             8,512.00

Standard DATA for		360	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 2 hrs x 360 units)=720 hrs	$                11.40	$         8,208.00

• Answers

--Requirement ‘a’

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                     11.40	-	$                    11.20	)	x	760
	152
	Variance		$                  152.00			Favourable-F
Labour TIME Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	720	-	760	)	x	$                        11.40
	-456
	Variance		$                  456.00			Unfavourable-U
Labor Cost Variance
(	Standard Cost	-	Actual Cost	)
(	$               8,208.00	-	$              8,512.00	)
	-304
	Variance		$                  304.00			Unfavourable-U

--Requirement ‘b’

Direct Labor that is to be debited to Work in Process = Standard direct labor cost = $ 8,208 [see working]