The following labor standards have been established for a particular product: Standard labor hours per unit of output 3hoursStandard labor rate$12per hourThe following data pertain to operations concerning the product for the last month: Actual hours worked 6,700hoursActual total labor cost$80,200 Actual output 2,200 unitsRequired:a. What is the labor rate variance for the month?b. What is the labor efficiency variance for the month?
What will be an ideal response?
a.
Labor rate variance = (AH × AR) ? (AH × SR)
= $80,200 - (6,700 hours × $12 per hour)
= $80,200 - $80,400
= $200 F
b.
SH = Standard hours per unit × Actual output
= 3 hours per unit × 2,200 units
= 6,600 hours
Labor efficiency variance = (AH ? SH) × SR
= (6,700 hours - 6,600 hours) × $12 per hour
= 100 hours × $12 per hour
= $1,200 U
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