Snazzy Jeans, Inc. manufactures designer jeans. The company uses standard costing and has developed the following information about standards for its product.
Materials: 2 yards per unit; $10 per yard
Labor: 0.25 DL hour per unit; $11 per hour
During October, the company experienced an unanticipated spike in demand and increased production. Although planned production was for 8,000 units, the company actually produced 10,000 units. In anticipation of the original production volume, 18,000 yards were purchased, at a total cost of $175,000. During the month, 22,000 yards of material were used, and 2,400 direct labor hours were worked. Direct labor cost for the month totaled $27,000.
Compute the direct labor rate variance and specify if it is favorable or unfavorable.
Solution is provided in a separate excel file attached. It contains not only labor rate of pay variance but other related variances like Labor Efficiency variance and Total labor variance for verification purpose. I have also provided special notes and comments regarding analysis of these favorable and unfavorable variances, its causes and remedies to improve unfavorable variance. I hope this comprehensive work will help you to study other variances too.
1 Labor Rate of ...
The expert examines a manufacturer of designer jeans. The direct labor rate variances are determined.