   Chapter 13, Problem 5SEQ

Chapter
Section
Textbook Problem

Bower Company produced 4,000 units of product. The direct labor standard quantity is 0.5 hours per unit. The standard labor rate is $12 per hour. Actual direct labor for the period was$22,000 (2,200 hours x $10 per hour). The direct labor time variance is: A.200 hours unfavorable B.$2,000 unfavorable C.$4,000 favorable D.$2,400 unfavorable

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

To Calculate:

The Direct Labor Time variance

Explanation

The Direct Labor Time variance is calculated as follows:

 Direct Labor Efficiency Variance: Actual hours (A) 2200 Hours Standard Hours (B) (4000 units * 0...

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