The Manchester Corporation manufactures wooden pictures frames. In order to better manage costs, the Manchester Corporation had previously developed the following standards for the manufacture of its product:
Each unit should have 3/4 of a pound of direct materials purchased at $12 per pound.
Each unit should be produced in 48 minutes at a direct labor cost of $16 per hour. The company had the following detailed retails:
Actual production was 20,000 units using 14,600 pounds of direct materials at a total cost of $168,000 and required 11,000 direct labor hours at a total cost of $190,000.

The Manchester Corporation manufactures wooden pictures frames. In order to better manage costs, the Manchester Corporation had previously developed the following standards for the manufacture of its product:

Each unit should have 3/4 of a pound of direct materials purchased at $12 per pound.

Each unit should be produced in 48 minutes at a direct labor cost of $16 per hour. The company had the following detailed retails:

Actual production was 20,000 units using 14,600 pounds of direct materials at a total cost of $168,000 and required 11,000 direct labor hours at a total cost of $190,000.

What is the company cost variance related to direct labour

Answer:

Direct labour cost total Variance = $66,000 favorable

Explanation:

The direct labor cost total variance is the difference between standard labour cost of the actual production achieved and the actual labour cost.

The standard labour cost of labour per unit of output is not given. So, we work it out first

Standard labour cost per unit= 48/60× $16= 12.8 per unit

$

20,000 units should have cost (20,000× 12.8) 256,000

but did cost 190,000

Direct labour cost total Variance 66,000 favorable

Direct labour cost total Variance = $66,000 favorable

priyankapandeyVT priyankapandeyVT · Answer 2 · 2022-04-13T05:29:11+02:00

The Direct Labor cost variance is $66,000.

What is labor cost variance?

It is the difference between the standard and actual labor cost required to produce goods or services.

Labor cost variance= Standard Cost of Labor – Actual Cost of Labor .

Given:

1 unit=3/4th pound of direct material at the rate $12/ pound

1 unit takes 48 minutes

Direct labor cost=$16/ hour

Actual production=20,000 units

Direct material required = 14,600 pounds

Total cost=$168,000

Required - direct labor hours=11,000 at total cost $190,000.

Standard labor cost per unit= time taken to complete 1 unit X hourly Rate of labor

= 48/60× $16= 12.8 per unit

Standard Cost of labor (20,000× 12.8) $256,000

Less-Actual Cost of labor (given) $190,000

Direct labor cost Variance $66,000

Therefore, the Labor cost variance is $66,000.

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