The standard cost of labor for the David Company's product is 2 hours of labor for each unit of product at a cost of $12 per hour. During December, 110,200 hours of labor were incurred to produce 58,000 units of product. The actual labor rate was $12.50 per hour. Compute the Labor Rate Variance and the Labor Efficiency (or Quantity) Variance
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The
During December, 110,200 hours of labor were incurred to produce 58,000 units of product. The actual labor rate was $12.50 per hour.
Compute the Labor Rate Variance and the Labor Efficiency (or Quantity) Variance
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