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29 July, 15:59

Japan Company produces lamps that require 3 standard hours per unit at a standard hourly rate of $12.00 per hour. Production of 8,900 units required 26,170 hours at an hourly rate of $12.20 per hour. What is the direct labor

(a) rate variance,

(b) time variance, and

(c) total cost variance? Enter favorable variances as negative numbers.

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  1. 29 July, 16:53
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    (a) rate variance = $ 5,234, Adverse

    (b) time variance = $ 6,360, Favourable

    (c) total cost variance = $1,126, Favourable

    Explanation:

    (a) rate variance,

    rate variance = (Standard Rate - Actual Rate) * Actual Hours

    = ($12.00 - $12.20) * 26,170 hours

    = $ 5,234, Adverse

    (b) time variance, and

    time variance = (Standard Hours - Actual Hours) * Standard Rate

    = (26,700 hours - 26,170 hours) * $12.00

    = $ 6,360, Favourable

    (c) total cost variance

    total cost variance = rate variance + time variance

    = $ 5,234, Adverse + $ 6,360, Favourable

    = $1,126, Favourable
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