Answer Corporation uses standard cost system. The standard costs and actual cost

Question

Answer Corporation uses standard cost system. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:

Standard Costs

Actual Costs

Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000

Refer to the information provided for Answer Corporation. The amount of the direct labor time variance is:

$1,200 favorable.

$1,140 unfavorable.

$1,200 unfavorable.

$1,140 favorable.

Standard Costs

Direct materials 2,500 kilograms @ $8 Direct labor 7,500 hours @ $12

Actual Costs

Direct materials 2,600 kilograms @ $8.75 Direct labor 7,400 hours @ $11.40 Factory overhead (100% capacity - 10,000 hrs.):

Explanation / Answer

$1,200 favorable. Particulars Standard Actual Qty Rate amount Qty Rate amount Materials        2,500.00           8.00          20,000.00        2,600.00            8.75          22,750.00 Labour        7,500.00    12.0000          90,000.00        7,400.00          11.40          84,360.00 Direct Labour Efficiency or time Variance DLEV = (SH-AH)SR DLEV = (7500 - 7400)12 DLEV = 1,200 F

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