A product's standard cost card specifies that a unit of the product requires 4 direct labor-hours. During September, 3,350 units were made, which was 150 units less than budgeted. The total budgeted direct labor cost for September was $117,600. The direct labor cost incurred during September was $111,850 and 13,450 direct labor-hours were worked.

The labor rate variance for the month was:

a) $5750 F

b) $1130 U

c) $5750 U

d) $1130 F

Question

Business

Corky

5 February, 07:05

A product's standard cost card specifies that a unit of the product requires 4 direct labor-hours. During September, 3,350 units were made, which was 150 units less than budgeted. The total budgeted direct labor cost for September was $117,600. The direct labor cost incurred during September was $111,850 and 13,450 direct labor-hours were worked.

The labor rate variance for the month was:

a) $5750 F

b) $1130 U

c) $5750 U

d) $1130 F

+1

Answers (1)

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Gwendolyn Cross · Answer 1

Direct labor rate variance = $1,130 favorable

Explanation:

Giving the following information:

Standard:

A unit of the product requires 4 direct labor-hours.

Budgeted production = 3,500 units

Budgeted direct labor cost = 117,600

Direct labor rate per hour = 117,600 / (3,500*4) = $8.4 per hour

Actual:

Production = 3,350 units

Direct labor cost = 111,850

Direct labor hours = 13,450

Direct labor rate per hour = 111,850/13,450 = $8.31598 per hour

To calculate the direct labor rate variance, we need to use the following formula:

Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

Direct labor rate variance = (8.4 - 8.31598) * 13,450

Direct labor rate variance = $1,130 favorable