In: Accounting
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
(1) Compute the direct labor rate variance, the
direct labor efficiency variance, and the total direct labor cost
variance for each of these two months. Classify each variance as
favorable or unfavorable.
(2) Javonte investigates variances of more than 5% of
actual direct labor cost. Which direct labor variances will the
company investigate further?