Question

Direct Labor Variances

The following data relate to labor cost for production of 3,400 cellular telephones:

Actual:	2,300 hrs. at $12.70
Standard:	2,260 hrs. at $13.00

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.

Rate variance	$	Favorable
Time variance	$	Unfavorable
Total direct labor cost variance	$	Favorable

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

Answer 1

	Standard			Actual
Particulars	Hours	Rate	amount	Hours	Rate	amount
Labour	2,260.00	13.0000	29,380.00	2,300.00	12.70	29,210.00
DLRV= (SR-AR)AH
DLRV= (13 - 12.70)2300
DLRV= 690 F
DLEV = (SH-AH)SR
DLEV = (2,260 - 2,300)13
DLEV = 520 U
Total direct labor cost variance = Standard cost - Actual cost
Total direct labor cost variance = 29,380 - 29,210
Total direct labor cost variance = 170 F
The employees may have been less-experienced workers who were paid less than more-experienced workers 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.