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Direct Labor Variances The following data relate to labor cost for production of 5,000 cellular telephones:...

Direct Labor Variances

The following data relate to labor cost for production of 5,000 cellular telephones:

Actual: 3,360 hrs. at $16.2
Standard: 3,310 hrs. at $16.4

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 $   
Time variance $   
Total direct labor cost variance $   

b. The employees may have been less-experienced 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.

Solutions

Expert Solution

a.

Actual rate = $16.2 per hour

Standard rate = $16.4 per hour

Actual time = 3,360 hours

Standard time = 3,310 hours

Rate variance = Actual time x ( Standard rate - Actual rate)

= 3,360 x (16.4-16.2)

= 3,360 x (0.2)

= $672 favorable

Time variance = Standard rate x ( Standard time - Actual time)

= 16.4 x (3,310-3,360)

= 16.4 x (-50)

= $820 unfavorable

Total direct labor cost variance = ( Standard rate x Standard time) - ( Actual rate x Actual time)

= (16.4 x 3,310) - (16.2 x 3,360)

= 54,284-54,432

= $148 unfavorable

Rate variance $672 favorable
Time variance $820   unfavorable
Total direct labor cost variance $148   unfavorable

b. 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.


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