Boldrin Incorporated has a standard cost system. The standards for direct labor for one of its products specify 0.20 hours per unit at $18.70 per hour. The company has reported the following actual results for the product for August:
Required:
a. Compute the labor rate variance for August.
b. Compute the labor efficiency variance for August.

a. Labor rate variance = (Actual hours × Actual rate) − (Actual hours × Standard rate)
= Actual hours × (Actual rate − Standard rate)
= 250 hours × ($18.50 per hour − $18.70 per hour)
= 250 hours × (−$0.20 per hour)
= $50 Favorable
b. Standard hours = 1,300 units × 0.20 hours per unit = 260 hours
Labor efficiency variance = (Actual hours × Standard rate) − (Standard hours × Standard rate)
= (Actual hours − Standard hours) × Standard rate
= (250 hours − 260 hours) × $18.70 per hour
= (−10 hours) × $18.70 per hour
= $187 Favorable