Provence Bicycle Company manufactures road bikes. The following data for September of the current year are available:
Quantity of direct labor used ...... 650 hrs.
Actual rate for direct labor ....... $ 14.00 per hr
Bicycles completed in September ....... 280
Standard direct labor per bicycle ..... 2.25 hrs
Standard rate for direct labor ...... $ 14.20 per hr.
(a) Determine the direct labor rate and time variance.
(b) How much direct labor should be debited to work in progress?
 

(a)   Rate variance:

Direct Labor Rate Variance = (Actual Rate per Hour – Standard Rate per Hour)

                                                         × Actual Hours

Direct Labor Rate Variance = ($14.00 – $14.20) × 650 hrs.

Direct Labor Rate Variance = – $130 Favorable Variance

        Time variance:

Direct Labor Time Variance = (Actual Direct Labor Hours – Standard Direct

                                                         Labor Hours) × Standard Rate per Hour

Direct Labor Time Variance = (650 hrs. – 630 hrs.*) × $14.20 per hour

Direct Labor Time Variance = $284 Unfavorable Variance

*2.25 hrs. × 280 units

        Total direct labor cost variance:

Direct Labor Cost Variance = Direct Labor Rate Variance + Direct Labor Time

                                                        Variance

Direct Labor Cost Variance = – $130 + $284

Direct Labor Cost Variance = $154 Unfavorable Variance

(b)   Debit to Work in Process: $8,946

                    Standard hours at actual production..............................                   630

                    Standard rate..................................................................          ×  $14.20

                    Standard direct labor cost..............................................          $    8,946