PE 23-2B direct labor variances

Dvorak Company produces a product that requires three standard hours per unit at a standard hourly rate of $17 per hour. If 1,000 units required 2,800 hours at an hourly rate of $16.50 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) cost variance?

Answer:

a. Direct labor rate 
variance (favorable) 
–$1,400 [($16.50 – $17.00) × 2,800 hrs.] 
 
b. 
 
Direct labor time 
variance (favorable) 
 
–$3,400 
 
[(2,800 hrs. – 3,000 hrs.) × $17.00] 
 
c. 
 
Direct labor cost 
 
–$4,800 
 
(–$1,400 – $3,400) or 
 variance (favorable)  [($16.50 × 2,800 hrs.) – ($17.00 × 3,000 hrs.)] 
   = $46,200 – $51,000