Actual number of oil changes performed: 950 Actual number of direct labor hours worked: 471 hours Actual rate paid per direct labor hour: $15.50 Standard rate per direct labor hour: $15.00
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Question Content Area
Calculating the Direct Labor Rate Variance and the Direct Labor Efficiency Variance
Guillermo's Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Guillermo has found that a typical oil change takes 30 minutes and 6.2 quarts of oil are used. In June, Guillermo's Oil and Lube had 950 oil changes.
Guillermo's Oil and Lube Company provided the following information for the production of oil changes during the month of June:
Actual number of oil changes performed: 950
Actual number of direct labor hours worked: 471 hours
Actual rate paid per direct labor hour: $15.50
Standard rate per direct labor hour: $15.00
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