Standard Faucets uses standard costing and recorded the following data for the month of August: $\begin{array}{lr}
\text { Standard direct labor rate } & \$ 10.00 \text { per hour } \
\text { Standard hours allowed for actual production } & 20,000 \text { hours } \
\text { Actual direct labor rate } & \$ 10.50 \text { per hour } \
\text { Labor efficiency variance } & \$ 5,000 \text { favorable }
\end{array}$ How much is the labor rate variance for August?
A)$9,750 unfavorable
B)$14,750 unfavorable
C)$4,750 unfavorable
D)$0

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours Worked. Given the labor efficiency variance is $5,000 favorable, it implies that fewer hours were worked than the standard allowed. The actual rate is $0.50 more than the standard rate. The labor rate variance is $0.50 x 19,500 hours (20,000 - 500 due to efficiency variance) = $9,750 unfavorable.

Standard Faucets Uses Standard Costing and Recorded the Following Data