Gauging the favorablenas of Variances when variances occur. they are described as being either fayorable or unfavorable. when actual activity consumes more time or money than initially planned, an unfavorable variance exlsls. However, when actual activity consumes less time or money than initially planned, a favorable variance exists. Note that the terms rayoraole and unfavorable are used, rather than saying that a variance is good or bad. because until the cause of a variance is discovered, it is not clear whether a variance is either good or bad. Note: Use the minus sign to indicate negative values (when the budgeted amount is greater than the actual). If a company calculates that the actual cost for the actual hours worked by employees was 54,300,000, and the amount budgeted for those hours actually worked was $4,300,000, the actual cost for hours worked less the budgeted cost forhours worked is a: . This tells you that the actual cost at actual hours worked is egual to ' ~/ the budgeted cost at actual hours worked. what type ofvariance is this? No Variance ' J If a company calculates that the budgeted post for actual hours worked is $190,000, and the budgeted cost at the budgeted amount of hours to have been worked is $100,000, the budgeted cost at actual time worked less the budgeted cost at budgeted hours to have been worked is 4:] .Thls tells you that the actual hours worked at budgeted cost is greater than . J budgeted hours worked at budgeted cost. what type ofvariance is this? Unlavorable direct labor time vat v J Fmback v Check My Vlblk Sumrad the budgeted amount tromthe actual amount to getttie Slgll correct, Note that N an amount spent or hours used tor labor goes down, then prams for lhe company go go. so a negative dinecl laborcost variance a favorable leewise. all increase in the amount spent nr hours used would decrease prams, Sn INS wuld be all unlavnrahle variance. SIE dE'd Dirac: Labs' C05: The controller at your shoemaking company has deterrnined that under normal conditions, you pay your employees saco per hour, and it wlll take 28 hours of labor per pair of shoes. Given this information, calculate the standard cost of labor per pair of shoes. If required, round the standard labor per pair of shoes to the nearest cent. Manufacturing CD-\"s Slandard "1TH 5 the actual urodu on Volume (3,000) at the standard unit cost. Direct Labor $\\:I per hour E hours 4:] Fmback v almk My Vlbtk Use the standard price and standard hours values shown to compule the standard labor cost per pair. '-' ' Ell Direct Labu' 265'. During September, your shoemaklng company incurred actual direct labor posts of 569,059 for 7,590 hours of direct labor in the production of 2,225 pairs of shoes. Given this information, calculate the actual cost of labor per hour. If required, round the actual cost of labor per hnur to the nearest :Ent. Manufacturing Costs Actual Total Cod f Actual Total Hours Actual Cost per Hour hour to the nearest cent. Manufacturing Costs Actual Total Cost / Actual Total Hours = Actual Cost per Hour Direct Labor hours Feedback Check My Work Use the actual total cost of labor and actual hours used as shown to compute the actual labor cost per hour. APPLY THE CONCEPTS: Conduct the direct labor cost variance analysis Illustrated Example: Calculating Direct Labor Cost Variance Complete the following graphic to compute the direct labor rate variance, the direct labor time variance, and the total direct labor cost variance for your shoe-making business. When required, enter the rates as dollars and cents. If required, use the minus sign to indicate a negative value. Actual Cost Standard Cost Actual Hours Actual Rate Actual Hours X Standard Rate Standard Hours X Standard Rate X X x X Direct Labor Rate Variance Direct Labor Time Variance This is the actual production volume (3,000) at the standard unit cost. $ $ U $ U V Total Labor Cost Variance