Paradise corp. has determined a standard labor cost per unit of $12 (1 hour × $12 per hour). last month, paradise incurred 1,900 direct labor hours for which it paid $21,850. the company also produced and sold 1,950 units during the month. calculate the direct labor rate, efficiency, and spending variances.

Direct Labor Rate Variance = $950

Direct Labor Efficiency Variance = $600

Total Direct Labor Spending Variance = $1,550

Explanation:

Data provided in the question:

Standard labor cost per unit = $12

Direct labor hours = 1,900

Actual Direct labor paid = $21,850

Units sold during the month = 1,950

Standard rate, SR = $12

Now,

Actual rate per unit, AR = $21,850 ÷ 1,900

= $11.5

Direct Labor Rate Variance = ( SR - AR ) × Actual hours

= ( $12 - $11.5 ) × 1900

= $950 ( Favourable )

Direct Labor Efficiency Variance = ( Standard hours - Actual hour ) × SR

= ( 1950 - 1900 ) × $12

= $600 ( favourable )

Total Direct Labor Spending Variance = Standard cost - actual cost

= ( 1950 × 12 ) - 21,850

=  $1,550 (favourable )