The following information describes a company's usage of direct labor in a recent period. The total direct labor cost variance is: $\begin{array}{llr}
\text { Actual hours used } &45,000\
\text { Actual rate per hour} &\$15.00\
\text {Standard rate per hour } &\$14.50\
\text {Standard hours for units produced } &47,000\
\end{array}$

A) $6,500 unfavorable.
B) $22,500 favorable.
C) $6,500 favorable.
D) $29,000 favorable.
E) $22,500 unfavorable.

Question

The following information describes a company's usage of direct labor in a recent period. The total direct labor cost variance is: $\begin{array}{llr}
  \text { Actual hours used } &45,000\
 \text {  Actual rate per hour} &\$15.00\
 \text {Standard rate per hour  } &\$14.50\
 \text {Standard hours for units produced } &47,000\
\end{array}$

A) $6,500 unfavorable.
B) $22,500 favorable.
C) $6,500 favorable.
D) $29,000 favorable.
E) $22,500 unfavorable.

Quizplus · Accepted Answer

The total direct labor cost variance is calculated as the difference between the actual cost of direct labor and the standard cost of direct labor. Since the variance is given as positive, it means that actual labor cost is less than the standard labor cost, resulting in a favorable variance. Therefore, the correct answer is C) $6,500 favorable.

The Following Information Describes a Company's Usage of Direct Labor