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The following labor standards have been established for a particular product:
Standard labor hours per unit of output 4.8 hours
Standard labor rate $20.60 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked 7,400 hours
Actual total labor cost $153,180
Actual output 1,500 units
Required:
a. What is the labor rate variance for the month?
b. What is the labor efficiency variance for the month?

Respuesta :

abiolataiwo2015

Answer:

a. 7400 U

b. 4120 U

Explanation:

A.Calculation to determine the labor rate variance for the month

Using this formula

Labor rate variance=(SR-AR) * AH

Let plug in the formula

Labor rate variance=[20.60-(153,180/7400)]*7400

Labor rate variance=(20.60-20.70)*7400

Labor rate variance=0.1*7400

Labor rate variance=7400 U

Therefore is Labor rate variance 7400 Unfavorable

b. Calculation to determine the labor efficiency variance for the month

Using this formula

Direct Labor Efficiency Variance = (Actual Direct Labor Hours Worked * Standard Labor Rate) - (Units Produced * Standard Direct Labor Hours per Unit * Standard Labor Rate)

Let plug in the formula

Direct Labor Efficiency Variance = (7400 hours x $20.60) - (1500 units x 4.8 hrs* $20.60)

Direct Labor Efficiency Variance = $152,440 - $148,320

Direct Labor Efficiency Variance = $4,120 UnFavorable

Therefore the labor efficiency variance for the month is $4,120 UnFavorable

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