Beautiful Beaches, Ltd. has set the following standards for direct labor (DL) costs per unit for the goods it manufactures:

- Standard Hours: 0.75 DL hours per unit
- Standard Rate: $19 per DL hour

During the month of November, the firm incurred the following actual DL costs to produce 8,940 units:

- Actual Total Hours: 7,152 total DL hours
- Actual Total DL Cost: $126,948

Tasks:

a. Calculate the DL cost variance. Indicate whether this variance is favorable (F) or unfavorable (U).

b. Calculate the DL rate variance. Indicate whether this variance is favorable (F) or unfavorable (U).

c. Calculate the DL efficiency variance. Indicate whether this variance is favorable (F) or unfavorable (U).

Cost variance is the process of evaluating the financial performance of project and compares budget that was set before the project started and what was spent.

To calculate the DL cost variance, we will to compare the actual DL cost with the standard DL cost.

Standard DL cost:

= Standard Hours * Standard Rate

= 0.75 DL hours per unit * $19 per DL hour

= $14.25 per unit

Actual DL cost:

= Actual total DL cost / Total units produced

= $126,948 / 8,940 units

= $14.20 per unit

DL cost variance will equals:

= Actual DL cost - Standard DL cost

= $14.20 per unit - $14.25 per unit

= -$0.05 per unit.