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Computation and interpretation of labor variances
After evaluating Zero Company's manufacturing process, management decided to establish standards of 1.5 hours of direct labor per unit of product and $11 per hour for the labor rate. During October, the company used 3,780 hours of direct labor at $45,360 total cost to produce 2,700 unit of product. In November, the company used 4,480 hours of direct labor at a $47,040 total cost to produce 2,800 units of product.
1. Compute the labor rate variance, the labor efficiency variance, and the total direct labor cost variance for October and for November.
2. Interpret the October direct labor variances.
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