A manufactured product has the following information for June.
| Standard | Actual | |||
| Direct materials | (5 lbs. @ $7 per lb.) | 39,500 | lbs. @ $7.10 per lb. | |
| Direct labor | (2 hrs. @ $16 per hr.) | 15,200 | hrs. @ $16.40 per hr. | |
| Overhead | (2 hrs. @ $12 per hr.) | $ | 192,300 | |
| Units manufactured | 7,800 | |||
Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
Explanation
Direct labor rate variance:
| Actual hours × Actual rate per hour (15,200 × $16.40) | $ | 249,280 | ||
| Actual hours × Standard rate per hour (15,200 × $16.00) | 243,200 | |||
| Direct labor rate variance | $ | 6,080 | U | |
Direct labor efficiency variance:
| Actual hours × Standard rate per hour (15,200 × $16.00) | $ | 243,200 | ||
| Standard hours × Standard rate per hour (15,600** × $16.00) | 249,600 | |||
| Direct labor efficiency variance | $ | 6,400 | F | |
**7,800 units × 2 hours per unit = 15,600 hours
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