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Chapter 13, Problem 13.23E
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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Direct labor variancesThe following data relate to direct labor costs for the production of smart tablets. a. Determine the rate variance, time variance, and total direct labor cost variance. b. Discuss what might have caused these variances.

To determine

Concept Introduction:

Direct labor variances:

Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:

1. Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows:
2.   Direct labor rate variance = (Actual rate – Standard rate) ×Actual hours

3. Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows:
4.   Direct labor efficiency variance = (Actual hours – Standard hours)×Standard rate

5. Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows:
6.   Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance

Or

Direct Labor cost variance = Actual Labor cost − Standard Labor Cost

Requirement-1:

To Calculate:

The Direct Labor Rate, Time, and Cost variances

Explanation

The Direct Labor Rate, Time, and Cost variances are calculated as follows:

 Direct Labor Rate Variance: Actual Rate (A) $23.00 Per hour Standard Rate (B)$ 24.50 Per hour Actual hours (C) 6300 Hours Direct Labor Rate Variance (D) = (A-B)*C = \$ 9,450 Favorable
To determine

Concept Introduction:

Direct labor variances:

Direct labor variances refer to the difference between the standard direct labor cost and actual direct labor cost incurred. Direct labor cost variances are categorized into following categories:

1. Direct labor Rate variance: this variance shows the difference of standard rate and actual rate of labor. The formula to calculate this variance is as follows:
2.   Direct labor rate variance = (Actual rate – Standard rate) ×Actual hours

3. Direct labor efficiency variance: this variance shows the difference of standard usage and actual usage of labor. The formula to calculate this variance is as follows:
4.   Direct labor efficiency variance = (Actual hours – Standard hours)×Standard rate

5. Direct labor cost variance: this variance shows the difference of standard cost and actual cost of labor. The formula to calculate this variance is as follows:
6.   Direct labor cost variance = Direct labor rate variance + Direct labor efficiency variance

Or

Direct Labor cost variance = Actual Labor cost − Standard Labor Cost

Requirement-2:

To Indicate:

The Causes for the variances

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