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A job was budgeted to require 2 hours of labor per unit at $11.00 per hour. The job consisted of 8,500 units and was completed in 16,000 hours at a total labor cost of $189,100. What is the total direct labor variance?

Question

A job was budgeted to require 2 hours of labor per unit at 11.00perhour.Thejobconsistedof8,500unitsandwascompletedin16,000hoursatatotallaborcostof11.00 per hour. The job consisted of 8,500 units and was completed in 16,000 hours at a total labor cost of 189,100. What is the total direct labor variance?

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Solution

To calculate the total direct labor variance, we need to first calculate the standard cost, actual cost, and then the difference between them.

  1. Calculate the Standard Cost: The standard cost is the cost that was originally expected or budgeted for the job. It is calculated by multiplying the budgeted labor hours per unit by the budgeted cost per labor hour, and then multiplying that by the total number of units.

    Standard Hours = 2 hours/unit * 8,500 units = 17,000 hours Standard Rate = 11.00/hourStandardCost=StandardHours∗StandardRate=17,000hours∗11.00/hour Standard Cost = Standard Hours * Standard Rate = 17,000 hours * 11.00/hour = $187,000

  2. Calculate the Actual Cost: The actual cost is the cost that was actually incurred to complete the job. In this case, it is given as $189,100.

  3. Calculate the Total Direct Labor Variance: The total direct labor variance is the difference between the standard cost and the actual cost.

    Total Direct Labor Variance = Actual Cost - Standard Cost = 189,100−189,100 - 187,000 = $2,100

So, the total direct labor variance is $2,100. This is a unfavorable variance, as the actual cost was higher than the standard cost.

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