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Actual labor costs of

# Actual labor costs of - \$59,850 This means that the...

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Actual labor costs of \$63,375 are more than flexible budget costs of \$58,500, so the labor rate  variance is \$4,875 unfavorable. As with materials, the labor can also be thought of on a price per  hour basis. The actual costs of \$63,375 were for 6,580 hours, which calculates to an average pay  rate of \$9.75 per direct labor hour. The budget used a rate of \$9.00 per direct labor hour. This \$0.75  per hour difference resulted in the unfavorable rate variance because actual costs were higher than  budgeted costs. This could result from unplanned but negotiated wage rate increases or the use of a  more skilled work force. The efficiency variance is favorable because flexible costs of \$58,500 are less than standard costs of
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Unformatted text preview: \$59,850. This means that the employees took less time than budgeted to produce the 13,300 sets of bases. 13,300 units were produced, and the company expected that the labor cost would be \$4.50 per set, for a total labor cost of \$59,850. This can also be analyzed by identifying the total hours of labor it should have taken to produce 13,300 sets of bases and multiplying by the cost per hour of labor (13,300 sets × .5 hours = 6,650 hours × \$9 per hour = \$59,850). Because only 6,500 direct labor hours were needed instead of the 6,650 hours expected, the direct labor efficiency variance is favorable....
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• Spring '09
• staff
• actual costs, flexible budget costs, actual labor costs, direct labor hour., unfavorable rate variance, labor rate   variance

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