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    Computing the Direct Labor Efficiency and Rate Variance

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    Company manufactures only one product x. The company uses a standard cost system and has established the following standards per unit of product x:

    Standard Quantity Standard Price Standard Cost
    Direct Materials 3.0 lbs. $12 per lb. $36.00
    Direct Labor 1.2 hrs. $15 per hr. $18.00

    During the month of May, the following activity was recorded:
    1. The company produced 6,000 units
    2. A total of 21,000 lbs. of material was used at a cost of $241,500.
    3. Each of 40 persons employed to produce the product x, worked an average of 160 hours at a rate of $16 per hour.

    For direct labor employed in the production of X, compute the direct labor rate variance and the direct labor efficiency variance.

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    Solution Summary

    Provides steps necessary to computer the direct labor efficiency variance and the direct labor rate variance.