The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
-The labor rate variance is:
A) $210 F
B) $190 F
C) $399 F
D) $190 U

Question

The Koski Company has established standards as follows:  Actual production figures for the past year were as follows: 
-The labor rate variance is:
A) $210 F 
B) $190 F 
C) $399 F 
D) $190 U

Quizplus · Accepted Answer

To find the labor rate variance, we need to calculate the difference between the actual labor rate and the standard labor rate multiplied by the actual hours worked.

Actual labor rate per hour = $11.60
Standard labor rate per hour = $12.00

Therefore, the labor rate variance = (Actual rate - Standard rate) x Actual hours
= ($11.60 - $12.00) x 3,180 hours
= -$0.40 x 3,180 hours
= -$1,272

Since the result is negative, it means that the actual labor rate is lower than the standard labor rate, resulting in an unfavorable variance. However, the question asks for the absolute value of the variance, so we take the positive value, which is $1,272.

Dividing this by the actual hours worked, we get the labor rate variance per hour:
$1,272 / 3,180 = $0.40

Since the actual labor rate is lower than the standard labor rate, the variance is unfavorable, and therefore $0.40 is unfavorable per hour.

Thus, the answer is D) $190 U (Unfavorable).

The Koski Company Has Established Standards as Follows: Actual