Javon Co. set standards of 3 hours of direct labor per unit at a rate of $15 per hour. During October, the company actually uses 16,250 hours of direct labor at a $247,000 total cost to produce 5,600 units. In November, the company uses 22,000 hours of direct labor at a $335,500 total cost to produce 6,000 units of product.
1. Compute the direct labor rate variance, the direct labor efficiency variance, and the total direct labor variance for each of these two months. Identify each variance as favorable or unfavorable.
2. Javon investigates variances of more than 5% of actual direct labor cost. Which direct labor variances will the company investigate further?
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