Gala Enterprises reports the following information regarding the production on one of its products for the month. Compute the total direct labor cost variance, the direct labor rate variance, the direct labor efficiency variance and identify each as either favorable or unfavorable.Direct labor standard (2 hrs. @ $15/hr.)$30 per finished unitActual direct labor hours60,800 hrs.Actual finished units produced30,000 unitsActual cost of direct labor$905,920
What will be an ideal response?
Direct labor cost variance:
Actual units at actual cost = $905,920
Standard units at standard cost = 30,000 ? 2 ? $15.00 = $900,000
Labor cost variance = $5,920 unfavorable
Direct labor rate variance
Actual cost = $905,920
AH ? SR = (60,800 ? $15.00) = $912,000
Direct labor rate variance = $6,080 favorable
Direct labor efficiency variance
AH ? SR = (60,800 ? $15.00) = $912,000
SH ? SR = (30,000 ? 2 ? $15.00) = $900,000
Direct labor efficiency variance = $12,000 unfavorable
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