Chapter 8, Problem 16E

After evaluating Null Company’s manufacturing process, managements decides to establish standards of 3 hours of direct labor per unit of product and $15 per hour for the labor rate. During October, the company uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units of product. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product.

1. Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months.
2. Interpret the October direct labor variances.