For the past two years, NE Company’s best-selling product has been a titanium engine block. Standard direct labor hours per block are 2.0 hours. All direct labor employees are paid $24 per hour. During July, NE produced 16,000 blocks. Actual direct labor hours and costs for the month were 31,000 hours and $775,000, respectively.
1. Compute the direct labor rate variance for blocks during July.
2. Using the same data, compute the direct labor efficiency variance for engine blocks during July. Check your answer, assuming that the total direct labor cost variance is $7,000 (U).