Question

In: Accounting

ABC Company set the following direct labor standards for its single product: standard hours standard rate...

ABC Company set the following direct labor standards for its
single product:

                  standard hours       standard rate
direct labor      5 hours per unit     $5 per hour

During June, ABC Company produced 10,100 units. Direct laborers
worked a total of 69,000 hours in June and were paid a rate of
$12.75 per hour.

Calculate the total direct labor variance for June. If the
variance is favorable, place a minus sign in front of your
answer (i.e., -5000). If the variance is unfavorable, enter
your answer as a number (i.e., 5000).

Solutions

Expert Solution

Given Information,

Standard labor hours per unit = 5 hours

Standard labor rate = $ 5 per hour

Actual production 10,100 Units

Actual hours worked = 69,000 hours

Actual labor rate = $ 12.75 per hour

Calculation of Total direct labor variance as folllows:

Total direct labor variance = ( AH * AR ) - ( SH * SR )

= ( 69,000 * $ 12.75 ) - ( 50,500 * $ 5 )

= $ 879,750 - $ 252,500

= $ 627,250

Thus, Total direct labor variance $ 6,27,250

SH (Standard hours for actual production)= Actual production * Standard labor hours required per unit

= 10,100 Units * 5 hour

= 50,500 hours

We can check our answer alternatively,

Total direct labor variance = Direct Labor price variance + Direct labor quantity/efficiency variance

= $ 534,750 + $ 92,500

= $ 627,250

Thus, Total direct labor variance $ 6,27,250.

Direct Labor price variance = ( AR -SR ) * AH

= ( $ 12.75 - $ 5 ) * 69,000

= $ 534,750

Direct labor quantity/efficiency variance = ( AH - SH ) * SR

= ( 69,000 - 50,500 ) * $ 5

= $ 92,500

Note: Variances without negtive sign represents Unfavorable Variance.

Where,

AH = Actual hours
SH = Standard hours for Actual production
AR = Actual Rate per hour
SR = Standard Rate per hour

Related Solutions

Jones Company has the following standards for its single product: standard quantity standard price direct materials...
Jones Company has the following standards for its single product: standard quantity standard price direct materials 13 pounds per unit $5.10 per pound direct labor 6 hours per unit $16.00 per hour variable overhead 6 hours per unit $11.00 per hour Jones Company reported the following information for the month of October: 1. 4,280 units were produced. 2. 63,000 pounds of direct materials were purchased at cost of $5.40 per pound. 3. 27,200 direct labor hours were worked. 4. The...
Pace Company has the following standards related to variable overhead for its single product: standard hours...
Pace Company has the following standards related to variable overhead for its single product: standard hours standard rate variable overhead 3 hours per unit $12.64 per hour During May, Pace Company paid its direct labor workers $644,000 and incurred variable overhead cost totaling $520,000. 14,000 units were produced during May and the direct labor workers were paid a rate of $16.10 per hour. Calculate the variable overhead efficiency variance for May. If the variance is favorable, place a minus sign...
Javonte Co. set standards of 3 hours of direct labor per unit of product and $16.80...
Javonte Co. set standards of 3 hours of direct labor per unit of product and $16.80 per hour for the labor rate. During October, the company uses 21,500 hours of direct labor at a $365,500 total cost to produce 7,400 units of product. In November, the company uses 25,500 hours of direct labor at a $434,775 total cost to produce 7,800 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate...
Wilson Company manufactures a product with a standard direct labor cost of 6.8 hours of labor...
Wilson Company manufactures a product with a standard direct labor cost of 6.8 hours of labor per unit at $9.40 per hour. Last month, 90 units were produced using 350 hours at $10.40 per hour. What was the company's total labor variance?
Biscuit Company has developed the following standards for one of its products. Direct labor hours is...
Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. Direct materials: 10 pounds × $3 per pound Direct labor: 2.5 hours × $8 per hour Variable manufacturing overhead: 2.5 hours × $2 per hour The following activity occurred during the month of June: Materials purchased: 125,000 pounds at $2.60 per pound Materials used: 110,000 pounds Units produced: 10,000 units Direct labor: 24,000 hours at...
Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs....
Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4.90 per Ib.) $ 147.00 Direct labor (4 hrs. @ $16 per hr.) 64.00 Factory overhead—variable (4 hrs. @ $6 per hr.) 24.00 Factory overhead—fixed (4 hrs. @ $10 per hr.) 40.00 Total standard cost $ 275.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 53,000 units per quarter. The following flexible budget...
Trico Company set the following standard unit costs for its single product. Direct materials (28 Ibs....
Trico Company set the following standard unit costs for its single product. Direct materials (28 Ibs. @ $5 per Ib.) $ 140.00 Direct labor (10 hrs. @ $10 per hr.) 100.00 Factory overhead—variable (10 hrs. @ $6 per hr.) 60.00 Factory overhead—fixed (10 hrs. @ $9 per hr.) 90.00 Total standard cost $ 390.00 The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 80,000 units per quarter. The following flexible budget...
Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs....
Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4.80 per Ib.) $ 144.00 Direct labor (8 hrs. @ $16 per hr.) 128.00 Factory overhead—variable (8 hrs. @ $9 per hr.) 72.00 Factory overhead—fixed (8 hrs. @ $12 per hr.) 96.00 Total standard cost $ 440.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 59,000 units per quarter. The following flexible budget...
Trico Company set the following standard unit costs for its single product. Direct materials (28 Ibs....
Trico Company set the following standard unit costs for its single product. Direct materials (28 Ibs. @ $5 per Ib.) $ 140.00 Direct labor (10 hrs. @ $10 per hr.) 100.00 Factory overhead—variable (10 hrs. @ $6 per hr.) 60.00 Factory overhead—fixed (10 hrs. @ $9 per hr.) 90.00 Total standard cost $ 390.00 The predetermined overhead rate is based on a planned operating volume of 60% of the productive capacity of 80,000 units per quarter. The following flexible budget...
Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs....
Trico Company set the following standard unit costs for its single product. Direct materials (30 Ibs. @ $4.80 per Ib.) $ 144.00 Direct labor (7 hrs. @ $14 per hr.) 98.00 Factory overhead—variable (7 hrs. @ $6 per hr.) 42.00 Factory overhead—fixed (7 hrs. @ $9 per hr.) 63.00 Total standard cost $ 347.00 The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 67,000 units per quarter. The following flexible budget...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT