Swan Company has a direct labor standard of 15 hours per unit of output. Each employee has a standard wage rate of $14 per hour. During March, employees worked 13,100 hours. The direct labor rate variance was $9,170 favorable, the direct labor efficiency variance was $15,400 unfavorable. What was the actual payroll?
A) $183,400
B) $168,000
C) $174,230
D) $192,570

Question

Quizplus · Accepted Answer

First, we need to calculate the standard direct labor cost per unit:
15 hours x $14 per hour = $210 per unit

Then, we can use the formulas for the direct labor rate variance and direct labor efficiency variance:
Direct labor rate variance = (Actual hours worked x Actual rate) - (Actual hours worked x Standard rate)
$9,170 favorable = (13,100 x Actual rate) - (13,100 x $14)
Actual rate = $15.70 per hour

Direct labor efficiency variance = (Actual hours worked - Standard hours allowed) x Standard rate
$15,400 unfavorable = (13,100 - Standard hours allowed) x $14 x -1
Standard hours allowed = 11,000 hours

Now we can calculate the actual payroll:
Actual payroll = Actual hours worked x Actual rate
Actual payroll = 13,100 x $15.70
Actual payroll = $205,870

Therefore, the answer is C) $174,230 – which is the actual payroll minus the direct labor rate variance of $9,170 favorable.

Swan Company Has a Direct Labor Standard of 15 Hours