Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period. Direct labor standard (4 hrs. @ $7/hr.) $ 28 per unit Actual hours worked 12,250
Actual rate per hour $ 7.50
A) $7,000 unfavorable.
B) $7,000 favorable.
C) $6,125 unfavorable.
D) $12,250 favorable.
E) $6,125 favorable.

Question

Quizplus · Accepted Answer

To find the direct labor rate variance, we need to first calculate the actual direct labor cost and the standard direct labor cost.

Actual Direct Labor Cost:

Actual hours worked = 12,250
Actual rate per hour = $7.50

Actual Direct Labor Cost = Actual hours worked x Actual rate per hour
= 12,250 x $7.50
= $91,875

Standard Direct Labor Cost:

Direct labor standard = 4 hours @ $7/hour = $28 per unit
Units produced = 3,500

Standard Direct Labor Cost = Direct labor standard x Units produced
= $28 x 3,500
= $98,000

Now, we can calculate the direct labor rate variance as follows:

Direct Labor Rate Variance = Actual Direct Labor Cost - Standard Direct Labor Cost
= $91,875 - $98,000
= -$6,125

The negative sign indicates an unfavorable variance. Therefore, the best choice is C, $6,125 unfavorable.

Use the Following Data to Find the Direct Labor Rate