Chapter 22, Problem 22.8EX

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307

Chapter
Section

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307
Textbook Problem

Direct labor variancesThe following data relate to labor cost for production of 20,000 cellular telephones: Actual: 8,450 hrs. at $22.50 Standard: 8,400 hrs. at$23.00 A. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. B. Discuss what might have caused these variances.

(a)

To determine

Direct labor variances:

The difference between the actual labor cost in the production and the standard labor cost for actual production is known as direct labor cost variance. The direct labor variance can be classified as follows:

• Labor rate variance.
• Labor time variance.

To determine: The direct labor rate variance.

Explanation

The direct labor rate variance is determined as follows:

DirectÂ laborÂ rateÂ varianceÂ =Â [(ActualÂ rateÂ perÂ hourâˆ’StandardÂ rateÂ perÂ hour)Ã—Â ActualÂ hours]=[(\$22

(b)

To determine

To explain: The reason behind the cause of these variances.

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