Direct labor variances: Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories: Direct labor Rate variance : this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows: Direct labor rate variance = ( Actual rate – Standard rate ) × Actual hours Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows: Direct labor efficiency variance = ( Actual hours – Standard hours ) × Standard rate Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows: Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance Or Direct Labor cost variance = Actual Labor cost − Standard Labor Cost To Indicate: The two variances between the actual cost and standard cost of direct labor and who has control over the direct labor cost
Direct labor variances: Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories: Direct labor Rate variance : this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows: Direct labor rate variance = ( Actual rate – Standard rate ) × Actual hours Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows: Direct labor efficiency variance = ( Actual hours – Standard hours ) × Standard rate Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows: Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance Or Direct Labor cost variance = Actual Labor cost − Standard Labor Cost To Indicate: The two variances between the actual cost and standard cost of direct labor and who has control over the direct labor cost
Solution Summary: The author explains the two variances between the actual cost and standard cost of direct labor.
Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.
Chapter 13, Problem 24CDQ
To determine
Concept Introduction:
Direct labor variances:
Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:
Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows:
Direct labor rate variance = (Actual rate – Standard rate)×Actual hours
Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows:
Direct labor efficiency variance = (Actual hours – Standard hours)×Standard rate
Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows:
Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance
Or
Direct Labor cost variance = Actual Labor cost − Standard Labor Cost
To Indicate:
The two variances between the actual cost and standard cost of direct labor and who has control over the direct labor cost
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