Question

Ramble Manufacturing manufactures a product with a direct labor quantity standard of 2 hours per unit. The company’s standard direct labor rate is $36 per hour. During March, the company paid $153,720 for 4,200 hours of direct labor. If 2,000 units were produced, what was the company’s direct labor price variance for March?

Answer 1

rate variance $(2,520.00)

Step-by-step explanation:

`(standard\:rate-actual\:rate) * actual \: hours = DL \: rate \: variance`

std rate $36.00

actual rate $36.60 (153,720/4,200)

actual hours 4,200

difference $(0.60)

rate variance $(2,520.00)

The difference between standard and actual is negative, so the variace is unfavorable.

Note for terminology:

Because the employee are giving their time for the company it is a better term to refer as rate variance.

Because the employee are not purchased like inventory.

They offer their working capacity at a given rate.

It is better to call this variance rate variance instead of price variance.