Coronado Family Instruments makes cellos. During the past year, the company made 6,370 cellos even though the budget planned for only 5,500. The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate. The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.

Calculate the direct labor rate and efficiency variances. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)

Instructions are below.

Explanation:

Giving the following information:

Production = 6,370 cellos

The Budget production = 5,500.

The company paid its workers an average of $15 per hour, which was $1 higher than the standard labor rate.

The production manager budgets four direct labor hours per cello. During the year, a total of 25,000 direct labor hours were worked.

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

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

Direct labor time (efficiency) variance = (4*6,370 - 25,000) * 14

Direct labor time (efficiency) variance = $6,720 favorable

Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

Direct labor rate variance = (14 - 15) * 25,000

Direct labor rate variance = $25,000 unfavorable