Accurate Tax Returns budgets 2 direct labor hours for every tax return that it prepares, at a standard cost of $32 an hour. During the most recent year, 500 returns were completed with the labor cost totaling $18,000. The actual labor cost was $36 per hour during that period. The actual number of labor hours was 1,000. What was the direct labor cost variance?
A)$2,000 F
B)$32,000 U
C)$4,000 U
D)$32,000 F

Question

Quizplus · Accepted Answer

Direct labor cost variance = (Actual hours x Actual rate) - (Budgeted hours x Standard rate)
= (1,000 x $36) - (500 x 2 x $32)
= $36,000 - $32,000
= $4,000 U (Unfavorable because the actual cost was higher than the budgeted cost)

Accurate Tax Returns Budgets 2 Direct Labor Hours for Every