Question

Direct Labor Variances

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	720 hrs.
Actual rate for direct labor	$13.6 per hr.
Bicycles completed in April	340 bicycles
Standard direct labor per bicycle	2 hrs.
Standard rate for direct labor	$13.9 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 unfavorable variance as a positive number.

Direct Labor Rate Variance	$	Favorable
Direct Labor Time Variance	$	Unfavorable
Total Direct Labor Cost Variance	$	Unfavorable

b. How much direct labor should be debited to Work in Process?
$

Answer 1

Requirement a

Labor rate variance	$               216.00	Favourable-F
Labor Efficiency variance	$               556.00	Unfavourable-U
Total Labor variance	$               340.00	Unfavourable-U

Working

		340	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	720	$         13.60	$ 9,792

Standard DATA for		340	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 2 minutes x 340 Units)=680 minutes	$                13.90	$               9,452.00

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  13.90	-	$                   13.60	)	x	720
	216
	Variance		$                 216.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	680	-	720	)	x	$           13.90
	-556
	Variance		$                 556.00			Unfavourable-U
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$            9,452.00	-	$             9,792.00	)
	-340
	Variance		$                 340.00			Unfavourable-U

Requirement b

Work in process will be debited for $ 9,452

.

The work in process is debited for the standard cost.