Accounting: What the Numbers Mean
Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Chapter 15, Problem 15.4ME
To determine

Concept Introduction:

Direct labor rate variance-

Direct labor rate variance is the variance which measures the difference between standard rate and actual hourly rate paid.. If actual rate paid is more than the standard rate then the variance is unfavorable and if actual rate paid is less than the standard rate then the variance is favorable. It is calculated as follows-

  Direct labor rate variance = (Standard rateActual rate)*Actual hours worked

Direct labor efficiency variance-

Direct labor efficiency variance is the variance which measures the difference between standard hours allowed and actual hours taken for the work done. If actual hours are more than the standard hours allowed then the variance is unfavorable and if actual hours are less than the standard hours allowed then the variance is favorable. It is calculated as follows-

  Direct labor efficiency variance = (Standard hoursActual hours)*Standard rate

To compute:

Direct labor rate variance and direct labor efficiency variance

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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY