Meow Products Ltd. Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available regarding the standard cost to produce a single post:
In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor minutes were incurred at a cost of $.32 per minute.
Refer to the Meow Products Ltd. information above. The company's direct labor rate variance for the current year is:
A) $ 200 F.
B) $ 200 U.
C) $3,200 F.
D) $3,200 U.

Question

Meow Products Ltd. Meow Products Ltd. produces and sells scratching posts for cats. In the current year, the company had expected to sell 12,000 posts but actually produced and sold 10,000 posts. The following information is available regarding the standard cost to produce a single post:
 In the current year, 38,000 feet of material were purchased out of which 35,000 feet were used at a cost of $1.55 per foot, and 160,000 direct labor minutes were incurred at a cost of $.32 per minute.
Refer to the Meow Products Ltd. information above. The company's direct labor rate variance for the current year is:
A) $ 200 F. 
B) $ 200 U. 
C) $3,200 F. 
D) $3,200 U.

Quizplus · Accepted Answer

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

Standard labor rate = $0.33 per minute
Actual labor rate = $0.32 per minute

Actual hours = 160,000 / 60 = 2,667 hours

Direct labor rate variance = ($0.32 - $0.33) x 2,667 = -$2,667

Since the actual labor rate is less than the standard rate, the variance is unfavorable or adverse. Therefore, the answer is D. $3,200 U.