Problem - Kwikeze Company set the following standard costs for one unit of its product.
Direct materials ((3.0 Ibs. @ $4.0 per Ib.) $ 12.00
Direct labor (1.9 hrs. @ $13.0 per hr.) 24.70
Overhead (1.9 hrs. @ $18.50 per hr.) 35.15
Total standard cost $ 71.85
The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% level.
Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials $ 15,000
Indirect labor 75,000
Power 15,000
Repairs and maintenance 30,000
Total variable overhead costs $ 135,000
Fixed overhead costs
Depreciation-building 25,000
Depreciation-machinery 72,000
Taxes and insurance 19,000
Supervision 276,250
Total fixed overhead costs 392,250
Total overhead costs $ 527,250
The company incurred the following actual costs when it operated at 75% of capacity in October.
Direct materials (46,500 Ibs. @ $4.20 per lb.) $ 195,300
Direct labor (30,000 hrs. @ $13.20 per hr.) 396,000
Overhead costs
Indirect materials $ 45,750
Indirect labor 177,500
Power 17,250
Repairs and maintenance 34,500
Depreciation-building 25,000
Depreciation-machinery 97,200
Taxes and insurance 17,100
Supervision 276,250 690,550
Total costs $ 1,281,850
Required - Compute the direct labor cost variance, including its rate and efficiency variances.