Bellingham Company produces a product that requires 6 standard direct labor hours per unit at a standard hourly rate of $22.00 per hour. If 4,800 units used 27,600 hours at an hourly rate of $22.44 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Question

Jairo Mata

Business

2 September, 07:39

Bellingham Company produces a product that requires 6 standard direct labor hours per unit at a standard hourly rate of $22.00 per hour. If 4,800 units used 27,600 hours at an hourly rate of $22.44 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

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Answers (1)

Know the Answer?

Libby King · Answer 1

The correct answer for (a) is 12,144 (Favorable), (b) is 26,400 (Unfavorable), and (c) is 14,256 (unfavorable).

Explanation:

According to the scenario, the computation of the given data are as follows:

(a) We can calculate the rate variance by using following formula:

Rate variance = Actual hours * (Standard rate - Actual rate)

= 27,600 * ($22 - $22.44)

= - $12,144 (Favorable)

(b). We can calculate the time variance by using following formula:

Time variance = Standard rate * (Standard hours - Actual hours)

= $22 * (6 * 4,800 - 27,600)

= 26,400 (Unfavorable)

(c). We can calculate the cost variance by using following formula:

Cost variance = Time variance - rate variance

= 26,400 - 12,144

= 14,256 (unfavorable)