Question

You are given the following budgeted information:

direct materials: $3.00 per lb, 3 lbs. per unit
direct labor $15 per hour, 2 hrs to make a unit

the company produced 1,000 units, and worked a total of 2,200 hours for a cost of $30,800. the direct labor rate variance is:
a. $2,200 F
b. $2,200 U
c. $2,000 F
d. $2,000 U

Answer 1

To calculate the direct labor rate variance, subtract the actual labor cost ($30,800) from the standard labor cost which is the standard rate of $15 per hour multiplied by the actual hours worked (2,200), resulting in a $2,200 favorable variance. The correct answer is option a.

Step-by-step explanation:

The student is asking about the calculation of the direct labor rate variance for a company that has budgeted information for its direct labor.

The provided details are the rate of direct labor ($15 per hour) and the time taken to produce a single unit (2 hours).

The actual total cost of direct labor is $30,800 for 2,200 hours worked.

The standard cost for direct labor can be calculated as the standard rate ($15 per hour) multiplied by the actual hours worked (2,200 hours), which gives us $33,000.

To calculate the direct labor rate variance, we subtract the actual labor cost from the standard labor cost:

$33,000 (standard) - $30,800 (actual) equals a $2,200 favorable variance, since the actual cost is less than the standard cost.