The standards for product G78V specify 4.1 direct labor-hours per unit at $12.10 per direct labor-hour. Last month 1,600 units of product G78V were produced using 6,600 direct labor-hours at a total direct labor wage cost of $77,220.Required:a. What was the labor rate variance for the month?b. What was the labor efficiency variance for the month?
What will be an ideal response?
a.
Labor rate variance = (AH × AR) ? (AH × SR)
= $77,220 ? (6,600 hours × $12.10 per hour)
= $77,220 ? $79,860
= $2,640 F
b.
SH = Standard hours per unit × Actual output = 4.1 hours per unit × 1,600 units= 6,560 hours
Labor efficiency variance = (AH ? SH) × SR
= (6,600 hours ? 6,560 hours) × $12.10 per hour
= 40 hours × $12.10 per hour
= $484 U
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