Goodhue Company produced 1,200 units of its only product last month. The company's employees were paid a total of $221,400 for working 20,500 hours. The standard wage rate is $10.50 and the standard time to produce a single unit is 17.50 hours. Calculate the direct labor variances and discuss possible reasons for the variances.
a. Labor rate variance
1. What was the standard hourly rate (SR)?
2. What was the actual hourly rate (AR)?
3. What were the actual hours worked (AH)?
4. Using the equation (SR - AR)AH calculate the labor rate variance?
b. Labor efficiency Variance
1. What are the standard hours per unit?
2. How many units were produced?
3. How many hours should have been used (SH)?
4. What were the actual hours worked (AH)?
5. What is the standard hourly rate (SR)?
6. Using the equation (SH - AH)SR calculate material quantity variance?
c. What might be some explanations for the above variances?