High School

Please help with the following:

The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. In producing 2000 units, the actual direct labor cost was $59,200 for 3700 direct labor hours worked.

Calculate the labor rate variance and the labor efficiency variance.

Answer :

To calculate the direct labor variance, we need to compare the actual direct labor cost with the standard direct labor cost.

Standard direct labor cost = Standard rate per hour × Standard hours worked

Standard direct labor cost = $15 per hour × 2 hours per unit × 2000 units = $60,000

Actual direct labor cost = $59,200

Now, we can calculate the direct labor variance:

Direct Labor Variance = Actual Direct Labor Cost - Standard Direct Labor Cost

Direct Labor Variance = $59,200 - $60,000 = -$800

The negative sign indicates an unfavorable variance, meaning that the actual direct labor cost exceeded the standard direct labor cost by $800. This suggests that the labor cost was higher than expected, and further analysis may be needed to identify the reasons for the variance and take corrective actions if necessary.

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