Direct Labor Variances The following data relate to labor cost for production of 6,300 cellular telephones: Actual: 4,290 hrs. at $12.7 Standard: 4,220 hrs. at $13 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 $ Favorable Time variance $ Unfavorable Total direct labor cost variance $ Favorable b. The employees may have been less-experienced or poorly trained, thereby resulting in a lower labor rate than planned. The lower level of experience or training may have resulted in less efficient performance. Thus, the actual time required was more 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 6,300 cellular telephones:
| Actual: | 4,290 hrs. at $12.7 | |
| Standard: | 4,220 hrs. at $13 |
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 | $ | Favorable |
| Time variance | $ | Unfavorable |
| Total direct labor cost variance | $ | Favorable |
b. The employees may have been less-experienced or poorly trained, thereby resulting in a lower labor rate than planned. The lower level of experience or training may have resulted in less efficient performance. Thus, the actual time required was more than standard.
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