Question

The following data relate to labor cost for production of 6,300 cellular telephones:

Actual:	4,270 hrs. at $15.2
Standard:	4,200 hrs. at $15.5

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.

Rate variance	$
Time variance	$
Total direct labor cost variance	$

b. The employees may have been less experienced or poorly trained, thereby resulting in a higher/lower labor rate than planned. The lower level of experience or training may have resulted in more/less efficient performance. Thus, the actual time required was more/less than standard.

Answer 1

a.

Direct labor rate variance = (Actual rate - Standard rate) x Actual hours

                                            = ($ 15.2 - $ 15.5) x 4,270

                                            = - $ 0.30 x 4,270

                                            = - $ 1,281           (F)

Direct labor time variance = (Actual hours – Standard hours) x Standard rate

                                               = (4,270 – 4,200) x $ 15.5

                                               = 70 x $ 15.5

                                               = $ 1,085       (U)

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

                                                      = - $ 1,281 + $ 1,085

                                                      = - $ 196         (F)

b.

The employees may have been less experienced or poorly trained, there by resulting a lower labor rate than planned. The lower level of experience or training may have resulted in less efficient performance. Thus, the actual time required was less than standard.