Asked by TEHREEM AHMED on Jun 12, 2024
Verified
The following direct labor standards have been established for product O64L: 
The following data pertain to last month's operations: 
Required:
a.What was the labor rate variance for the month?
b.What was the labor efficiency variance for the month?
Direct Labor Standards
The expected labor time and cost that should be incurred under normal conditions to produce a unit of output.
Labor Rate Variance
The difference between the actual cost of direct labor and the estimated cost of direct labor at standard rates for the production achieved.
Labor Efficiency Variance
The difference between the actual hours worked to produce goods and the standard hours expected, multiplied by the standard labor rate, indicating efficiency in labor use.
- Evaluate variations in wage rates and labor effectiveness.
Verified Answer
= $78,540 − (6,600 hours × $12.80 per hour)
= $78,540 − $84,480
= $5,940 F
b.SH = Standard hours per unit × Actual output = 7.2 hours per unit × 900 units = 6,480 hours
Labor efficiency variance = (AH − SH)× SR
= (6,600 hours − 6,480 hours)× $12.80 per hour
= 120 hours × $12.80 per hour
= $1,536 U
Learning Objectives
- Evaluate variations in wage rates and labor effectiveness.
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