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Computing Labor Rate and Efficiency Variances

6. The following labor standards have been established for a particular product:
Standard labor hours per unit of output......0.3 hours
Standard labor rate..................................$15.50 per hour

The following data pertain to operations concerning the product for the last month:
Actual hours worked.........3800
Actual total labor cost.....$59,470
Actual output.......... 12,800 units

Required: a. What is the labor rate variance for the month? b. What is the labor efficiency variance for the month

Solution Preview

a. What is the labor rate variance for the month?

Actual rate per hour = Actual total labor cost/Actual hours worked
Actual rate per hour = $59,470/3,800
Actual rate per hour = $15.65

Labor rate variance = (Actual hours*actual rate per hour) -(Actual hours*Standard rate per hour)
Labor ...

Solution Summary

This solution illustrates how to compute a labor rate and labor efficiency variances.

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