As a cost accountant at Tesla, you are analyzing the direct labor cost variance for the production of electric cars. The standard labor rate is $30 per hour, and the standard labor hours per car are 10 hours. During the period, 500 cars were produced, with actual direct labor costs of $160,000. Calculate:

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  • The labor rate variance.
  • The labor efficiency variance. Present your calculations in a paragraph format and discuss potential reasons for the variances observed.