Final Exam The following labor standards have been establish

Final Exam The following labor standards have been established for a particular product 16 4.5 hours 19.70 per hour Standard labor rate 3 The following data pertain to operations concerning the product for the last month: Actual total labor cost Actual output $ 130,975 1,400 units a. What is the labor rate variance for the month? b, what is the labor efficiency variance for the month? Input all amounts as positive values.)

Solution

(a)

Labor rate variance

$2,925

Unfavorable (U)

(b)

Labor efficiency variance

$3,940

Unfavorable (U)

(a)Labor rate variance = Actual Hours x (Actual Rate – Standard Rate)

Actual Hours (AH) = 6,500 Hours

Actual Rate (AR) = $130,975 / 6,500 Hours = $20.15 per hour

Standard Rate (SR) = $19.70 per hour

Labor rate variance = AH x (AR – SR)

= 6,500 x ( $20.15 - $19.70)

= 6,500 x $0.45

= $2,925 Unfavorable (U)

(b)Labor efficiency variance = Standard Rate x (Actual Hours – Standard Hours )

Standard Rate (SR) = $19.70 per hour

Actual Hours (AH) = 6,500 Hours

Standard Hours (SH) = 1,400 Units x 4.50 Hour = 6,300 Hours

Labor efficiency variance = SR x (AH – SH )

= $19.70 x ( 6,500 Hours – 6,300 Hours )

= $19.70 x 200 Hours

= $3,940 Unfavorable (U)

(a)	Labor rate variance	$2,925	Unfavorable (U)
(b)	Labor efficiency variance	$3,940	Unfavorable (U)