Question
Javonte Co. set standards of 3 hours of direct labor per unit of product and $16.80 per hour for the labor rate. During October, the
Javonte Co. set standards of 3 hours of direct labor per unit of product and $16.80 per hour for the labor rate. During October, the company uses 21,500 hours of direct labor at a $365,500 total cost to produce 7,400 units of product. In November, the company uses 25,500 hours of direct labor at a $434,775 total cost to produce 7,800 units of product. AH = Actual Hours SH = Standard Hours AR = Actual Rate SR = Standard Rate (1) Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor cost variance for each of these two months. Classify each variance as favorable or unfavorable. (2) Javonte investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?
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