Figure 10-6. Extreme Builders constructs houses.The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home.During the year,it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour.
Refer to Figure 10-6.Calculate the Extreme Builders' labor rate variance.
A)$540,000 U
B)$540,000 F
C)$648,000 U
D)$648,000 F

Question

Quizplus · Accepted Answer

Labor Rate Variance = (Actual Rate - Standard Rate) x Actual Hours

Actual Rate = $28 per hour
Standard Rate = $25 per hour

Actual Hours = 18,000 hours per home x 12 homes = 216,000 hours
Standard Hours = 15,000 hours per home x 12 homes = 180,000 hours

Labor Rate Variance = ($28 - $25) x 216,000 = $648,000 U

Therefore, the answer is C as the labor rate variance is $648,000 U.