Flapjack Corporation had 7,800 actual direct labor hours at an actual rate of $12.44 per hour. Original production had been budgeted for 1,100 units, but only 975 units were actually produced. Labor standards were 7.2 hours per completed unit at a standard rate of $13.00 per hour. Round your answer to the nearest cent. The direct labor time variance is

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Lena Wall

Business

9 April, 18:34

Flapjack Corporation had 7,800 actual direct labor hours at an actual rate of $12.44 per hour. Original production had been budgeted for 1,100 units, but only 975 units were actually produced. Labor standards were 7.2 hours per completed unit at a standard rate of $13.00 per hour. Round your answer to the nearest cent. The direct labor time variance is

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Alannah Sanders · Answer 1

Direct labor efficiency variance = $9,360 unfavorable

It is unfavorable because it took longer to produce 975 units than the standard time estimated.

Explanation:

Giving the following information:

Standard direct labor hour per unit = 7.2 hours

Standard rate = $13

Actual units = 975

Actual hours = 7,800

Actual rate = $12.44

The direct labor time variance is also known as the direct labor efficiency variance. It calculates the effect on costs of the time required to produce the actual amount of units.

We need to use the following formula:

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

Standard quantity = 975 units*7.20 = 7,020 hours

Direct labor efficiency variance = (7,020 - 7,800) * 12 = $9,360 unfavorable

It is unfavorable because it took longer to produce 975 units than the standard time estimated.