Question

Roman Mfg.'s July production involved actual direct labor costs of $41,514 for 3,400 direct labor hours. The budget for the July level of production called for 3,500 direct labor hours at $12.20 per hour, using a standard cost system.

1. Roman's labor rate variance for July is ____________

2. Roman's labor efficiency variance for July is _______________

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Roman Mfg.'s July production involved actual direct labor costs of $41,514 for 3,400 direct labor hours. The budget for the July level of production called for 3,500 direct labor hours at $12.20 per hour.

To calculate the direct labor efficiency and rate variance, we need to use the following formulas:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (3,500 - 3,400)*12.2

Direct labor time (efficiency) variance= $1,220 favorable

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 41,514/3,400= $12.21

Direct labor rate variance= (12.20 - 12.21)*3,400

Direct labor rate variance= $34 unfavorable