Edelman Oil performs oil changes. The standard wage rate for oil change technicians is $ 17 per hour. By analyzing its past records of time spent on oil changes, the company has developed a standard of 18 minutes (or 0.30 hours) per oil change. In July, 1 comma 600 oil changes were performed at Edelman Oil. Oil change technicians worked a total of 310 direct labor hours at an average rate of $ 24 per hour.

a. Calculate the direct labor rate variance.

b. Calculate the direct labor efficiency variance.

Instructions are below.

Explanation:

Giving the following information:

The standard wage rate for oil change technicians is $ 17 per hour. standard of 18 minutes (or 0.30 hours) per oil change.

Production = 1,600 oil changes

Actual hours = 310 direct labor hours

the average rate = $ 24 per hour.

To calculate the direct labor rate and efficiency variance, we need to use the following formulas:

Direct labor time (efficiency) variance = (Standard Quantity - Actual Quantity) * standard rate

Direct labor time (efficiency) variance = (0.3*1,600 - 310) * 17

Direct labor time (efficiency) variance = $2,890 favorable

Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

Direct labor rate variance = (17 - 24) * 310

Direct labor rate variance = $2,170 unfavorable