Scribd
Upload
980 views3 pages

Labor Variance

The manufacturing company produced 3,200 units in a period where the standard time was 45 minutes. This resulted in a $520 favorable labor rate variance and a $2,800 unfavorable labor efficiency variance. The standard calculations show the standard hours allowed were 2,400 hours, actual hours worked were 2,600 hours, and the actual wage rate was $13.80.

Uploaded by

Raj Escabarte Licayan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
980 views3 pages

Labor Variance

The manufacturing company produced 3,200 units in a period where the standard time was 45 minutes. This resulted in a $520 favorable labor rate variance and a $2,800 unfavorable labor efficiency variance. The standard calculations show the standard hours allowed were 2,400 hours, actual hours worked were 2,600 hours, and the actual wage rate was $13.80.

Uploaded by

Raj Escabarte Licayan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

A manufacturing company is expected to complete a task in 45 minutes.

During a recent accounting


period, 3,200 completed units were produced, resulting in the following labor variances:

Labor rate variance: $520 favorable


Labor efficiency variance: $2,800 unfavorable

The standard labor rate is $14 per hour.

Required:
Calculate (1) the standard hours allowed for the work performed, (2) the actual hours worked, and
(3) the actual wage rate.

LO: 3 Type: A

Answer:

Actual Labor Cost Standard Labor Cost


Actual Actual Actual Standard Standard Standard
x x x
Hours Rate Hours Rate Hours Rate
2,600 x $13.80 2,600 x $14.00 2,400* x $14.00
$35,850 $36,400 $33,600
$520F $2,800U
Direct-labor Direct-labor
rate variance efficiency variance
*3,200 units x 0.75 hours

1. Standard hours allowed: 2,400


2. Actual hours worked: 2,600
3. Actual wage rate: $13.80

Upstate manufactures a product that has the following standard costs:

Direct materials: 40 yards at $2.70 per yard $108


Direct labor: 8 hours at $18.00 per hour 144
Total $252

The following information pertains to July:

Direct material purchased: 42,500 yards at $2.78 per yard, or $118,150


Direct material used: 36,000 yards
Direct labor: 7,500 hours at $18.30 per hour, or $137,250
Actual completed production: 1,050 units

Required:
Calculate the direct-material price and quantity variances and the direct-labor rate and efficiency
variances. Indicate whether each variance is favorable or unfavorable.

LO: 3 Type: A
Answer:

Actual Material Cost


Actual Actual Actual Standard
x x
Quantity Price Quantity Price
42,500 x $2.78 42,500 x $2.70
$118,150 $114,750
$3,400U
Direct-material
price variance

Standard Material Cost


Actual Standard Standard Standard
x x
Quantity Price Quantity Price
36,000 x $2.70 42,000* x $2.70
$97,200 $113,400
$16,200F
Direct-material
quantity variance
*1,050 units x 40 yards

Actual Labor Cost Standard Labor Cost


Actual Actual Actual Standard Standard Standard
x x x
Hours Rate Hours Rate Hours Rate
7,500 x $18.30 7,500 x $18.00 8,400# x $18.00
$137,250 $135,000 $151,200
$2,250U $16,200F
Direct-labor Direct-labor
rate variance efficiency variance
#1,050 units x 8 hours

You might also like