Racemark Corporation produces taillight lenses for a number of automobile manufacturers. A production scheduling problem in April required the use of 500 hours of labor on an overtime basis in addition to the 14,000 standard hours allowed for the number of lenses actually produced in April. As a result of the overtime premium, the actual average wage rate for April was $32 compared to the standard rate of $25. What was the labor rate variance for April?
A) $3,500 Unfavorable.
B) $98,000 Unfavorable.
C) $101,500 Unfavorable.
D) $7.00 per hour.

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours. Here, it is ($32 - $25) x (14,000 + 500) = $7 x 14,500 = $101,500 Unfavorable.

Racemark Corporation Produces Taillight Lenses for a Number of Automobile