Question

Paradise Corp. has determined a standard labor cost per unit of $24 (0.50 hour × $48 per hour). Last month, Paradise incurred 974 direct labor hours for which it paid $25,811. The company produced and sold 2,550 units during the month.

Calculate the direct labor rate, efficiency, and spending variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Round your intermediate calculations to 2 decimal places.)

Answer 1

Solution

Labor rate variance	$         20,941.00	Favourable-F
Labor Efficiency variance	$         14,448.00	Favourable-F
Total Labor Spending variance	$         35,389.00	Favourable-F

Working

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  48.00	-	$                      26.50	)	x	974
	20941
	Variance		$             20,941.00			Favourable-F
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1275	-	974	)	x	$           48.00
	14448
	Variance		$             14,448.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         61,200.00	-	$             25,811.00	)
	35389
	Variance		$             35,389.00			Favourable-F

.

Actual DATA for		2550	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	974	$         26.50	$          25,811.00

.

Standard DATA for		2550	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 0.5 Hour x 2550 Units)=1275 Hour	$                48.00	$            61,200.00