Labor Cost Variance Calculation for Lee Maritime Company

What is the direct labor cost variance for Lee Maritime Company?

Calculate the direct labor cost variance based on the given data and standard costs.

Answer:

Rate Variance: $72,000.00 F

Efficiency Variance: $75,000.00 U

Total Variance: $3,000.00 U

Explanation:

The direct labor cost variance for Lee Maritime Company is calculated by considering the standard rate and actual rate, as well as the standard hours and actual hours worked during the quarter.

The rate variance is calculated as follows:

Standard rate: $15.00

Actual rate: $12.60 (calculated as $378,000 total labor costs / 30,000 actual labor hours)

Actual hours: 30,000

Difference: $2.40

Therefore, the rate variance is $72,000.00 F, indicating that the company saved costs related to labor rates.

The efficiency variance is calculated as follows:

Standard hours: 25,000.00 (calculated as 5,000 units x 5 hours each = 25,000)

Actual hours: 30,000.00

Standard rate: $15.00

Difference: -5,000.00

Therefore, the efficiency variance is $75,000.00 U, indicating that the company incurred higher costs due to using more labor hours than standard.