QS 8-11 Direct labor variances LO P2 The following information describes a compa

Question

QS 8-11 Direct labor variances LO P2 The following information describes a company's direct labor usage in a recent period. Actual direct labor hours used (AH) Actual direct labor rate per hour (AR) Standard direct labor rate per hour (SR) Standard direct labor hours for units produced (SH) 65,000 $ 15 $ 14 67,000 AH- Actual Hours SH = Standard Hours AR Actual Rate SR Standard Rate Compute the direct labor rate and efficiency variances for the period and classify each as favorable or unfavorable. Actual Cost Standard Cost SH AR

Explanation / Answer

Direct labor rate variance = (SR - AR) X AH
= ($14 - $15) X 65,000 = $65,000 Unfavorable

Direct labor efficiency variance = (SH - AH) X SR
= (67,000 - 65,000) X $14 = $28,000 Favorable

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