Chapter 23, Problem 10E

To determine

Labor Rate Variance:

At the actual direct labor hours, the variance between the actual direct labor cost based on actual rate incurred and the budgeted direct labor cost based on standard rate is called direct labor cost variance.

Direct Labor Efficiency Variance:

Direct labor efficiency variance measures the efficiency in utilization of direct labor costs by determining the difference between the actual labor hours and the standard labor hours allowed at the standard rate.

To determine:

(1) Computation of direct labor rate variance.

(2) Compute the direct labor efficiency variances.

Indicate whether each variance is favorable or unfavorable.