The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows:
The amount of the direct labor rate variance is:
A) $2,960 unfavorable
B) $4,500 favorable
C) $2,960 favorable
D) $4,500 unfavorable

Question

The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows: 
 The amount of the direct labor rate variance is:
A) $2,960 unfavorable 
B) $4,500 favorable 
C) $2,960 favorable 
D) $4,500 unfavorable

Quizplus · Accepted Answer

To calculate the direct labor rate variance, we use the formula:

Direct labor rate variance = (Standard rate - Actual rate) x Actual hours

Standard rate = Total standard labor cost / Total standard hours
= ($44,000 + $6,000) / 5,000 hours
= $10 per hour

Actual rate = Total actual labor cost / Total actual hours
= $29,500 / 2,500 hours
= $11.80 per hour

Direct labor rate variance = ($10 - $11.80) x 2,500
= $4,500 unfavorable

However, the question asks for the amount of the direct labor rate variance, not the variance itself. Therefore, we need to take the absolute value of the variance, which is $4,500, and identify whether it is favorable or unfavorable by comparing it to the standard cost. Since the standard cost is $10 per hour and the actual cost is $11.80 per hour, the actual cost is higher than the standard cost, which means that the variance is unfavorable.

Therefore, the answer is C) $2,960 favorable.

The Standard Costs and Actual Costs for Direct Labor for the Manufacture