After evaluating Zero Company's manufacturing process, management decides to establish standards of 4.0 hours of direct labor per unit of product and $16 per hour for the labor rate. During October, the company uses 16,900 hours of direct labor at a $256,880 total cost to produce 5,600 units of product. In November, the company uses 19,500 hours of direct labor at a $304,200 total cost to produce 5,800 units of product.

Compute the rate variance, the efficiency variance, and the total direct labor cost variance for each of these two months.
Rate Variance= 16,900x16-256880=
Efficiency Variance=()x16=
I am very confused about Efficiency Variance. Does anybody have any idea what Standard Quantity should I use to come with correct answer for Efficiency Variance. Very very confused, Please help

First off, you have your formula for rate variance backwards. It should be:

Labor rate variance = (Actual hours worked × Actual rate) − (Actual hours worked × Standard rate)=256,800-(16900*16)
That is just October. You also need to compute November.


For your efficiency variance, you are being asked to compute the labor efficiency variance. The standard quantity of labor for October is the units produced x the 4 hours of direct labor that is standard per unit.

Thanks, It worked.

Thanks, It worked out, Now I am confused with other problem about finding the fixed cost, can YOU GIVE ME ANY IDEA ABOUT IT. I already posted problem that I am facing about.It is about Scatter Diagram and high low method. Thanks again

Could you write this formual out. Can not make out Actual Hours worked Standard Rate