Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons • Actual man hour rate varies from the standard man hour rate and/or • Actual efficiency of labor employed varies from the standard efficiency. Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance. Labor Rate Variance: The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance. Labor Efficiency Variance: The difference between actual man hours and standard man hours is the Labor Efficiency Variance. The following formulas are used to calculate Labor Cost Variance: Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV) Also, LCV= Standard Cost –Actual Cost of labor Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked. Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable. To Determine: Direct Labour rate and Efficiency Variance

Question

Want to see the full answer?

Answer 1

Question

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 23, Problem 11QS

To determine

Concept Introduction:

Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons

• Actual man hour rate varies from the standard man hour rate and/or

• Actual efficiency of labor employed varies from the standard efficiency.

Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.

Labor Rate Variance: The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.

Labor Efficiency Variance: The difference between actual man hours and standard man hours is the Labor Efficiency Variance.

The following formulas are used to calculate Labor Cost Variance:

Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)

Also, LCV= Standard Cost –Actual Cost of labor

Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost

Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.

Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.

To Determine: Direct Labour rate and Efficiency Variance

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Financial Accounting

A retail company purchased new display fixtures for $28,000. Old store equipment was sold for $2,500. A marketable security investment was sold for $45,000. Treasury stock was repurchased for $18,000, and dividends were paid to shareholders in the amount of $30,000. The company issued new bonds resulting in proceeds of $75,000. Calculate the net cash flow from investing activities.

Acme Corporation purchases machinery for $78,000 with a salvage value of $8,000 and an expected useful life of 7 years. What is the annual depreciation expense using the straight-line method? Help

Answer 2

Question

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 23, Problem 11QS

To determine

Concept Introduction:

Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons

• Actual man hour rate varies from the standard man hour rate and/or

• Actual efficiency of labor employed varies from the standard efficiency.

Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.

Labor Rate Variance: The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.

Labor Efficiency Variance: The difference between actual man hours and standard man hours is the Labor Efficiency Variance.

The following formulas are used to calculate Labor Cost Variance:

Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)

Also, LCV= Standard Cost –Actual Cost of labor

Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost

Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.

Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.

To Determine: Direct Labour rate and Efficiency Variance

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

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 23, Problem 11QS

To determine

Concept Introduction:

Labor Cost Variance: The difference between the standard cost of labour estimated and the actual cost of the labor used is the Labor Cost Variance. This variance arises because of two reasons

• Actual man hour rate varies from the standard man hour rate and/or

• Actual efficiency of labor employed varies from the standard efficiency.

Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.

Labor Rate Variance: The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.

Labor Efficiency Variance: The difference between actual man hours and standard man hours is the Labor Efficiency Variance.

The following formulas are used to calculate Labor Cost Variance:

Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)

Also, LCV= Standard Cost –Actual Cost of labor

Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost

Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.

Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.

To Determine: Direct Labour rate and Efficiency Variance

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

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 23, Problem 11QS

To determine