Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August? Multiple Choice $1,188 Unfavorable $972 Favorable $2,808 Unfavorable $2,160 Favorable

Question

Business

Markus Pearson

30 April, 17:33

Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August? Multiple Choice $1,188 Unfavorable $972 Favorable $2,808 Unfavorable $2,160 Favorable

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Answers (1)

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Maximilian Harmon · Answer 1

Direct labor rate variance = $1,188 unfavorable

Explanation:

Giving the following information:

Standard labor rate = $7.20 per hour

Actual hours worked = 6,600 hours

Actual total labor cost = $48,708

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

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

Actual rate = 48,708/6,600 = $7.38 per hour

Direct labor rate variance = (7.2 - 7.38) * 6,600

Direct labor rate variance = $1,188 unfavorable