A favorable labor efficiency variance indicates better productivity of direct labor during a period. The actual rate of $7.50 is computed by dividing the total actual cost of labor by the actual hours ($217,500 divided by 29,000 hours).

This variance is calculated as the difference between the actual labor hours used to produce an item and the standard amount that should have been used, multiplied by the standard labor rate.

It didn’t seem fair to have the new guy making more than her faithful staff. How much direct labor should be debited to Work in Process? The Cutting Department used 2,900 direct labor hours at an actual rate of $11.30 per hour.

This results in reduced manufacturing costs affecting the financial statements positively.

Greeson Clothes Company produced 15,000 units during June of the current year. 4.

The difference between the standard price column and flexible price column is referred to the efficiency variance for direct labor, and that difference is 800. Again, we can go through the exercise of classifying these variances as favorable or unfavorable. х . Favorable -6,250 Direct Labor Rate Variance Unfavorable $ 4,800 Direct Labor Time Variance Favorable $ х Total Direct Labor Cost Variance b. There is a labor rate variance of $2,550 unfavorable.

And the difference between the flexible budget and the static budget is 4,000. Get more help from Chegg. A favorable labor rate variance indicates that the company managed to hire labor at a lower rate than what was budgeted. Causes for favorable labor efficiency variance may include: Hiring of more higher skilled labor (this may adversely impact labor rate variance) Training of work force in … Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Direct Labor Variances. If the actual rate is higher than the standard rate, the variance is unfavorable since the company paid more than what it expected. So Mary takes this information to her boss, explaining that she was unable to find a qualified employee at the old rate. She also wanted to make sure her staff were happy employees, so she needed to bring them all up to that rate as well. The Sewing Department used 4,800 direct labor hours at an actual rate of $11.00 per hour. Jackson Manufacturing planned to produce 20,000 units of product and work at the 60,000 direct labor hours level of activity for 2016. If actual rate is lower than standard rate, the variance is favorable.. Analyzing a Favorable DL Rate Variance

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