DL VARIANCES

You are the manager of the production department. One of your primary goals for the most recent month was to control costs.

A. Determine the direct labour price and efficiency variances, rating each variance favourable or unfavourable.

Comment on the labour variances: interpret (do not restate the variances) in your answer.

Standards indicate that for 1,000 units (one month's production), direct labour hours should be 3,150 paid at $20 per hour. Your department spent 3,280 hours and paid a total of $61,500 to the assembly workers.

Price Variance = (AP - SP) AQ

Efficiency Variance = (AQ - SQ) x SP