Madrid Co.has a direct labor standard of 4 hours per unit of output.Each employee has a standard wage rate of $11 per hour.During February,Madrid Co.paid $99,500 to employees for 9,150 hours worked.2,400 units were produced during February.What is the direct labor rate variance?
A)$1,150 favorable
B)$4,950 favorable
C)$6,100 favorable
D)$302 favorable

Question

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Actual Hours Worked x Actual Rate) - (Actual Hours Worked x Standard Rate). The actual rate is $99,500 / 9,150 hours = $10.87 per hour. The standard rate is $11 per hour. Thus, the variance is (9,150 hours x $10.87) - (9,150 hours x $11) = $99,500 - $100,650 = -$1,150, which is a $1,150 favorable variance because the actual cost is less than the standard cost.

Madrid CoHas a Direct Labor Standard of 4 Hours Per Unit