Question

Crane Products embosses notebooks with school and corporate logos. Last year, the company's direct labor payroll totaled $421,684 for 50,070 direct labor hours. The standard wage rate is $8.50 per direct labor hour. Calculate Crane's direct labor rate variance.

Answer 1

Crane Products' direct labor rate variance is calculated as the difference between the standard labor rate and actual wage rate, multiplied by the actual labor hours worked. The company has a favorable variance of $4,005.60, meaning actual labor costs were less than standard.

Step-by-step explanation:

The direct labor rate variance for Crane Products can be calculated by comparing the actual labor cost to the standard labor cost based on the standard wage rate multiplied by actual labor hours worked. The standard labor cost can be found by multiplying the standard wage rate ($8.50 per direct labor hour) by the actual labor hours worked (50,070 hours).

The direct labor rate variance is found using the following formula:
(Direct labor standard wage - Actual wage rate) x Actual labor hours worked. With a total direct labor payroll of $421,684 and 50,070 direct labor hours, the actual wage rate per hour is calculated as $421,684 / 50,070 hours = $8.42.

Thus, the variance calculation would look like this:
($8.50 standard rate - $8.42 actual rate) x 50,070 hours = $0.08 x 50,070 hours = $4,005.60. Since the actual cost was less than the standard cost, Crane Products has a favorable direct labor rate variance of $4,005.60.