Question

Japan Company produces lamps that require 3 standard hours per unit at a standard hourly rate of $15.10 per hour. Production of 3,300 units required 10,200 hours at an hourly rate of $14.60 per hour. What is the direct labor (a) rate variance, (b) time variance, and (c) total cost variance

Answer 1

Answer:

A.5,100 Favorable

B.$2,550 Favorable

C.$71,910Favorable

Explanation:

A)Labor rate variance: (Actual – Standard Price) actual hours worked are 10,200

Standard rate is $15.10 and Actual rate is 14.60.

Labor rate variance = 10,200 (14.60 - $15

10)

= 10,200 (-$0.5) = 5,100 Favorable.

B)Time Variance: Labor efficiency variance

10,200- 5,100

=5,100

= 5,100($15.10 - $14.60)

= 5,100 ($0.5) = $2,550 Favorable.

C)Cost Variance:

= $15.10*5,100 - $14.60*10,200

= $77,010 - $148,920

= $71,910Favorable.