In: Accounting
1.
Direct Labor Variances
Bellingham Company produces a product that requires 4 standard hours per unit at a standard hourly rate of $22.00 per hour. If 5,000 units required 20,800 hours at an hourly rate of $20.90 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) 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.
a. Direct labor rate variance | $ | |
b. Direct labor time variance | $ | |
c. Total direct labor cost variance | $ |
2.
Factory Overhead Volume Variance
Dvorak Company produced 4,100 units of product that required 4.5
standard hours per unit. The standard fixed overhead cost per unit
is $2.20 per hour at 17,350 hours, which is 100% of normal
capacity. Determine the fixed factory overhead volume variance.
Enter a favorable variance as a negative number using a minus sign
and an unfavorable variance as a positive number.
$ Favorable
1. Direct labor variances:
Standard hours required to produce 5,000 units = 5,000 x 4 = 20,000 hours.
Actual hours used to produce 5,000 units = 20,800 hours
Standard rate = $22.00 per hour
Actual rate = $20.90 per hour
Now,
Direct labor rate variance | -$22,880 |
Direct labor time variance | $17,600 |
Total direct labor cost variance | -$5,280 |
(a) Direct labor rate variance = (Standard rate - Actual rate) x Actual hours
= ($22.00 - $20.90) x 20,800
= $22,880 Favorable
(b) Direct labor time variance = (Standard hours - Actual hours) x Standard rate
= (20,000 - 20,800) x $22.00
= $17,600 Unfavorable
(c) Total direct labor cost variance = (Standard hours x Standard rate) - (Actual hours x Actual rate)
= (20,000 x $22.00) - (20,800 x $20.90)
=$440,000 - $434,720
= 5,280 Favorable
2. Factory overhead volume variance:
Applied fixed overhead = No. of units produced x Standard hours required per unit x Standard rate per unit
= 4,100 Units x 4.5 hours x $2.20 per hour
= $40,590
Budgeted fixed overhead = Standard hours x standard rate
= 17,350 x $2.20
= $38,170
Now,
Factory overhead volume variance | - $2,420 |
Factory overhead volume variance = Applied fixed overhead - Budgeted fixed overhead
= $40,590 - $38,170
= $2,420 Favorable