Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor rate variance. $\begin{array}{llr}
\text { Direct labor standard (2 hrs. @ \$12.75/hr.) } &\$25.50& \text { per finished unit } \
\text { Actual direct labor hours} &81,500& \text {hrs. } \
\text {Actual finished units produced } &40,000& \text {units } \
\text { Actual cost of direct labor } &\$1,100,250\
\end{array}$

A) $61,125 unfavorable.
B) $19,125 unfavorable.
C) $61,125 favorable.
D) $80,250 unfavorable.
E) $80,250 favorable.

Question

Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor rate variance. $\begin{array}{llr}
  \text { Direct labor standard (2 hrs. @ \$12.75/hr.) } &\$25.50& \text { per finished unit } \
 \text {  Actual direct labor hours} &81,500& \text {hrs.  } \
 \text {Actual finished units produced  } &40,000& \text {units  } \
 \text { Actual cost of direct labor } &\$1,100,250\
\end{array}$

A) $61,125 unfavorable.
B) $19,125 unfavorable.
C) $61,125 favorable.
D) $80,250 unfavorable.
E) $80,250 favorable.

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). The actual rate is $1,100,250 / 81,500 hours = $13.50/hour. The standard rate is $12.75/hour. The variance is 81,500 hours x ($13.50 - $12.75) = $61,125 unfavorable.

Fletcher Company Collected the Following Data Regarding Production of One