Fletcher Company collected the following data regarding production of one of its products. Compute the total direct labor variance. Direct labor standard (2 hours @ $12.75/hour) $ 25.50 per finished unitActual direct labor hours 81,500 hoursActual finished units produced 40,000 unitsActual cost of direct labor $ 1,100,250 Multiple Choice$80,250 favorable.$61,125 favorable.$80,250 unfavorable.$61,125 unfavorable.$19,125 favorable.
Question
Fletcher Company collected the following data regarding production of one of its products. Compute the total direct labor variance. Direct labor standard (2 hours @ 25.50 per finished unitActual direct labor hours 81,500 hoursActual finished units produced 40,000 unitsActual cost of direct labor 80,250 favorable.80,250 unfavorable.19,125 favorable.
Solution
To calculate the total direct labor variance, we need to compare the actual cost of direct labor to the standard cost of direct labor.
Step 1: Calculate the Standard Cost of Direct Labor The standard cost is the amount that the labor should have cost to produce the finished units. This is calculated by multiplying the standard labor hours per unit by the standard labor cost per hour, and then multiplying by the number of units produced.
Standard labor hours per unit = 2 hours Standard labor cost per hour = $12.75 Number of units produced = 40,000 units
Standard cost = (2 hours/unit * 1,020,000
Step 2: Calculate the Actual Cost of Direct Labor The actual cost is given as $1,100,250.
Step 3: Calculate the Total Direct Labor Variance The total direct labor variance is the actual cost minus the standard cost.
Total direct labor variance = Actual cost - Standard cost Total direct labor variance = 1,020,000 = $80,250
Because the actual cost is higher than the standard cost, this is an unfavorable variance. So, the answer is $80,250 unfavorable.
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