Direct Labor Variances The following data relate to labor cost for production of 3,800 cellular telephones: Actual: 2,600 hrs. at $14.20 Standard: 2,560 hrs. at $14.50 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 $fill in the blank 1 Time variance $fill in the blank 3 Total direct labor cost variance $fill in the blank 5 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
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 3,800 cellular telephones:
| Actual: | 2,600 hrs. at $14.20 |
| Standard: | 2,560 hrs. at $14.50 |
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 | $fill in the blank 1 |
|
| Time variance | $fill in the blank 3 |
|
| Total direct labor cost variance | $fill in the blank 5 |
|
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.
The labor variance is the difference between the actual and standard labor cost. The variance can be classified as Favorable or Unfavorable on the basis of the difference in the cost.
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