The following information describes a company’s usage of direct labor in a recent period. The total direct labor variance is: Actual hours used 48,000Actual rate per hour $ 14.00Standard rate per hour $ 13.30Standard hours for units produced 51,000
Question
The following information describes a company’s usage of direct labor in a recent period. The total direct labor variance is: Actual hours used 48,000Actual rate per hour 13.30Standard hours for units produced 51,000
Solution
The total direct labor variance can be calculated using the formula:
Total Direct Labor Variance = (Actual Hours * Actual Rate) - (Standard Hours * Standard Rate)
First, calculate the actual cost and the standard cost:
Actual Cost = Actual Hours * Actual Rate Actual Cost = 48,000 hours * 672,000
Standard Cost = Standard Hours * Standard Rate Standard Cost = 51,000 hours * 678,300
Then, substitute these values into the formula:
Total Direct Labor Variance = Actual Cost - Standard Cost Total Direct Labor Variance = 678,300 = -$6,300
So, the total direct labor variance is -$6,300. This negative variance indicates that the actual cost was less than the standard cost, which is favorable for the company.
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