XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the direct labor cost variance.Multiple choice question.$2,000 F$1,000 U$2,000 U$1,000 F
Question
XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = 83,000; SH x SR = 2,000 F2,000 U$1,000 F
Solution 1
The direct labor cost variance is calculated as the difference between the actual cost of labor and the standard cost of labor.
Here, AH x AR = Actual Hours (AH) x Actual Rate (AR) = 83,000 (Actual Cost at Standard Rate) SH x SR = Standard Hours (SH) x Standard Rate (SR) = $85,000 (Standard Cost)
The formula for direct labor cost variance is (AH x AR) - (SH x SR).
Substituting the given values into the formula, we get:
Direct Labor Cost Variance = (85,000) = -$1,000
The negative sign indicates that the variance is unfavorable. Therefore, the direct labor cost variance is 1,000 U.
Solution 2
The direct labor cost variance is calculated as the difference between the actual cost of labor and the standard cost of labor.
Here, AH x AR = Actual Hours (AH) x Actual Rate (AR) = 83,000 (Actual Cost at Standard Rate) SH x SR = Standard Hours (SH) x Standard Rate (SR) = $85,000 (Standard Cost)
The formula for direct labor cost variance is (AH x AR) - (SH x SR).
Substituting the given values into the formula, we get:
Direct Labor Cost Variance = (85,000) = -$1,000
The negative sign indicates that the variance is unfavorable. Therefore, the direct labor cost variance is 1,000 U.
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