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22 August, 04:11

The following labor standards have been established for a particular product:Standard labor hours per unit of output 4.3 hoursStandard labor rate $ 20.10 per hourThe following data pertain to operations concerning the product for the last month:Actual hours worked 6,900 hoursActual total labor cost $ 139,380Actual output 1,500 unitsRequired:a. What is the labor rate variance for the month? b. What is the labor efficiency variance for the month?

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  1. 22 August, 04:41
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    Answer: 1. $690 (favorable)

    2. $9045 (favorable)

    Explanation: These can be computed as follows : -

    Labor rate variance = Actual labor cost - (standard rate * actual hours)

    = $139,380 - ($20.1 * 6900 hours)

    = $690 (favorable)

    .

    Labor efficiency variance = (Actual hours - standard hours) * (standard rate)

    = [6900 hours - (1500 units * 4.3 hours) ] * ($20.1)

    = $9045 (favorable)
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