Question

Midgley Corporation makes a product whose direct labor standards are 2.1 hours per unit and $22.00 per hour. In April, the company produced 6,200 units using 12,780 direct labor-hours. The actual direct labor cost was $269,020. The labor rate variance for April is:

(A) $5,280 U
(B) $5,280 F
(C) $5,199 F
(D) $5,308 U

Answer 1

$12,140 Favorable

Not in option

Step-by-step explanation:

Actual rate per hour of labor = $269,020/12,780 hours = $21.05

Standard Rate provided = $22.00

Labor Rate Variance = (Standard Rate - Actual Rate)
`*` Actual Hours

Here, Actual Hours = 12,780

Therefore, Labor Rate Variance = ($22 - $21.05)
`*` 12,780

= $12,140 Favorable as actual rate is less than standard rate.

The options provided are not correct.