Sunday, September 22, 2019

Giovanni Company produces a product that requires five standard hours per unit at a standard hourly rate of $30 per hour

Giovanni Company produces a product that requires five standard hours per unit at a standard hourly rate of $30 per hour. If 3,500 units required 17,700 hours at an hourly rate of $30.50 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance?

Answer:

a. Direct labor rate 
variance (unfavorable) 
$8,850 [($30.50 – $30.00) × 17,700 hrs.] 
b. Direct labor time 
variance (unfavorable) 
$6,000 [(17,700 hrs. – 17,500 hrs.) × $30.00] 
c. 
 
Direct labor cost 
variance (unfavorable) 
 
$14,850 
 
($8,850 + $6,000) or 
[($30.50 × 17,700 hrs.) – ($30.00 × 17,500 hrs.)] 
= $539,850 – $525,000 

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