Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product:
$\begin{array} { | l | r | r | r | }
\hline & \text { Standard Quantity } & \text { Standard Price } & \text { Standard Cost } \
\hline \text { Direct Materials } & 6 \text { kilograms } & \$ 3.50 / \text { kilogram } & \$ 21.00 \
\hline \text { Direct Labour } & 1.3 \text { hours } & \$ 11.00 / \text { hour } & \$ 14.30 \
\hline & & & \$ 35.30 \
\hline
\end{array}$During March, Bryan purchased 165,000 kilograms of direct materials at a total cost of $585,750. The total factory wages for March were $400,000, 90 percent of which were for direct labour. Bryan manufactured 25,000 units of product during March, using 151,000 kilograms of direct materials and 32,000 direct labour hours.

-What was the direct labour rate variance for March?
A) $8,000 favourable.
B) $8,000 unfavourable.
C) $48,000 favourable.
D) $48,000 unfavourable.

Question

Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product:
$\begin{array} { | l | r | r | r | } 
\hline & \text { Standard Quantity } & \text { Standard Price } & \text { Standard Cost } \
\hline \text { Direct Materials } & 6 \text { kilograms } & \$ 3.50 / \text { kilogram } & \$ 21.00 \
\hline \text { Direct Labour } & 1.3 \text { hours } & \$ 11.00 / \text { hour } & \$ 14.30 \
\hline & & & \$ 35.30 \
\hline
\end{array}$During March, Bryan purchased 165,000 kilograms of direct materials at a total cost of $585,750. The total factory wages for March were $400,000, 90 percent of which were for direct labour. Bryan manufactured 25,000 units of product during March, using 151,000 kilograms of direct materials and 32,000 direct labour hours.

-What was the direct labour rate variance for March?
A) $8,000 favourable.
B) $8,000 unfavourable.
C) $48,000 favourable.
D) $48,000 unfavourable.

Quizplus · Accepted Answer

The direct labour rate variance is calculated as the difference between the actual labour cost per hour and the standard labour cost per hour, multiplied by the actual hours worked. The actual labour cost per hour is found by dividing the total direct labour cost by the actual direct labour hours. The total direct labour cost is 90% of $400,000, which is $360,000. The actual direct labour hours are 32,000. So, the actual labour cost per hour is $360,000 / 32,000 = $11.25. The standard cost per hour is $11.00. The variance is ($11.25 - $11.00) * 32,000 = $0.25 * 32,000 = $8,000 unfavourable, because the actual cost per hour is higher than the standard cost per hour.

Bryan Company Employs a Standard Cost System in Which Direct