Direct Labor Variances Venneman Company produces a product that requires 4 standard hours per unit at a standard hourly rate of $12 per hour. If 14,000 units required 58,000 hours at an hourly rate of $11.85 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) total direct labor cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. a. Direct labor rate variance $ Favorable b. Direct labor time variance $ Unfavorable c. Total direct labor cost variance $ Unfavorable
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Direct Labor Variances
Venneman Company produces a product that requires 4 standard hours per unit at a standard hourly rate of $12 per hour. If 14,000 units required 58,000 hours at an hourly rate of $11.85 per hour, what is the direct labor (a) rate variance, (b) time variance, and (c) total direct labor cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
| a. Direct labor rate variance | $ | Favorable |
| b. Direct labor time variance | $ | Unfavorable |
| c. Total direct labor cost variance | $ | Unfavorable |
Standard cost means the cost which the company is expecting to be incurred on the basis of estimate made earlier.
This standard is set and then compare with actual cost and remedial actions are taken.
Direct labor cost has been further divided in rate variance and time variance.
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