Question

Direct Labor Variances

Glacier Bicycle Company manufactures commuter bicycles from recycled materials. The following data for October of the current year are available:

Quantity of direct labor used	550 hrs.
Actual rate for direct labor	$12.80 per hr.
Bicycles completed in October	260 bicycles
Standard direct labor per bicycle	2 hrs.
Standard rate for direct labor	$13.10 per hr.

a. Determine for October 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	$
Direct Labor Time Variance	$
Total Direct Labor Cost Variance	$

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

Answer 1

Answer:

(a)

Direct labor rate variance              = Actual hours x ( Actual rate (-) Standard Rate )              = 550 x ( $ 12.80 (-) $ 13.10)              =    ($ 165) Favourable

Direct labor rate variance =    ($ 165) Favourable

Direct labor time variance              = Standard Rate x ( Actual hours (-) Standard Hours )               = $ 13.10 x ( 550 (-) ( 260 x 2)               =   $ 393 Unfavourable

Direct labor time variance   =   $ 393 Unfavourable

Total Direct labor cost variance                   = $ 393 (-) $ 165                   = ( $ 228 ) Favourable

Total Direct labor cost variance   = ( $ 228 ) Favourable

(b)

Direct labor debited to Work in process                =   260 x 2 x $ 13.10                =    $ 6,812

Direct labor debited to Work in process   =    $ 6,812