Dover Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Dover's labor rate variance is:
A) $4,200U.
B) $4,000F.
C) $4,300U.
D) $4,300F.
E) none of the other answers are correct.

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). Here, the actual rate is $158,200 / 14,000 hours = $11.30. The variance is (14,000 x $11.30) - (14,000 x $11) = $158,200 - $154,000 = $4,200 Unfavorable (U).

Dover Enterprises Recently Used 14,000 Labor Hours to Produce 7,500