Concept explainers
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:
- 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:
- 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:
- 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:
Or
Direct Labor cost variance = Actual Labor cost − Standard Labor Cost
To Indicate:
The two variances between the actual cost and standard cost of direct labor and who has control over the direct labor cost
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- A. What are the two variances between the actual cost and the standard cost for direct labor? B. Who generally has control over the direct labor cost variances?arrow_forwardThe variable overhead rate variance is caused by the sum between which of the following? A. actual and standard allocation base B. actual and standard overhead rates C. actual and budgeted units D. actual units and actual overhead ratesarrow_forwardA. Describe the two variances between the actual costs and the standard costs for factory overhead. B. What is a factory overhead cost variance report?arrow_forward
- If variances are recorded in the accounts at the time the manufacturing costs are incurred, what does a debit balance in Direct Materials Price Variance represent?arrow_forwardWhat are the two variances between the actual cost and the standard cost for direct materials?arrow_forwardThe fixed factory overhead variance is caused by the difference between which of the following? A. actual and standard allocation base B. actual and budgeted Units C. actual fixed overhead and applied fixed overhead D. actual and standard overhead ratesarrow_forward
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- What is the direct labor rate variance?arrow_forwardHow do price and quantity variances relate to materials costs?arrow_forwardWhen is the labor rate variance favorable? A. when the actual quantity used is greater than the standard quantity B. when the actual quantity used is less than the standard quantity C. when the actual price paid is greater than the standard price D. when the actual price is less than the standard pricearrow_forward
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