Charlene Company has set labor costs at $24 per unit of output, based on 3 hours allowed to produce each finished unit. Last month, 1,500 direct labor hours were used, and 750 units of output were manufactured at a total cost of $36,000.
Required:
a. Determine the labor rate variance.
b. Determine the labor efficiency variance.
c. If the company used fewer direct labor hours than those reflected in the standards, which variance would be affected? Explain.

Question

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The Answer of Charlene Company has set labor costs at $24 per unit of output, based on 3 hours allowed to produce each finished unit. Last month, 1,500 direct labor hours were used, and 750 units of output were manufactured at a total cost of $36,000.
Required:
a. Determine the labor rate variance.
b. Determine the labor efficiency variance.
c. If the company used fewer direct labor hours than those reflected in the standards, which variance would be affected? Explain.

Charlene Company Has Set Labor Costs at $24 Per Unit