Question

Direct Labor Variances

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

Quantity of direct labor used	550 hrs.
Actual rate for direct labor	$13.4 per hr.
Bicycles completed in April	260 bicycles
Standard direct labor per bicycle	2 hrs.
Standard rate for direct labor	$13.7 per hr.

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.

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

Ans: a.

1.       Direct labor rate variance= (Actual labor rate per hour-standard rate per hour)*quantity of direct labor used

                                             = ($13.4-$13.7)*550=-$165 “Favorable”

2.       Direct Labor time variance

= ( quantity of direct labor actually used- standard direct labor allowed for 260 bicycles)*standard labor rate per hour

= (550-260*2)*$13.7

= $411”Unfaborable”

3.       Total direct labor cost variance= Direct labor rate variance+ Direct labor time variance

                                                              = -$165+$411

                                                        = $246 “unfavorable”

b. Direct labor debited to work in process= standard direct labor allowed*standard labor rate per hour

                                                                                                   = 520*$13.7=$7124