Direct Labor Variances The following data relate to labor co

Direct Labor Variances

The following data relate to labor cost for production of 3,700 cellular telephones:

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.

b. The employees may have been less-experienced or poorly trained, thereby resulting in a Higher or 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.

Solution

a) Rate variance = (14.8-14.5)*2530 = -759 Favorable

Time variance = (2490-2530)*14.8 = 592 Unfavorable

Total direct labour cost variance = (2490*14.8)-(2530*14.5) = -167 Favorable

b) The employee may have less experienced or poorly trained, thereby resulting lower labour rate than planned. The lower level of experience or training may have resulted in less efficient performance. Thus the actual time required was more than standard