Direct Labor Variances The following data relate to labor cost for production of 33,000 cellular telephones: Actual: 6,330 hrs. at $49.50 Standard: 6,240 hrs. at $51.00 a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Rate variance $ Time variance $ Total direct labor cost variance $ b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a ____ labor rate than planned. The lower level of experience or training may have resulted in ____ efficient performance. Thus, the actual time required was ____ than standard
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.
Direct Labor Variances
The following data relate to labor cost for production of 33,000 cellular telephones:
| Actual: | 6,330 hrs. at $49.50 |
| Standard: | 6,240 hrs. at $51.00 |
a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
| Rate variance | $ | |
| Time variance | $ | |
| Total direct labor cost variance | $ |
b. The employees may have been less-experienced workers who were paid less than more-experienced workers or poorly trained, thereby resulting in a ____ labor rate than planned. The lower level of experience or training may have resulted in ____ efficient performance. Thus, the actual time required was ____ than standard.
Rate variance = (Actual rate - Standard rate)*Actual hours
Time variance = (Actual hours - Standard hours)*Standard rate
Total direct labor cost variance = (Actual hours*Actual rate) - (Standard hours*Standard rate)
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