Question

The following data relate to direct labor costs for the current period:

Line Item Description Value
Standard costs 9,000 hours at $5.50
Actual costs 8,500 hours at $5.75
The direct labor rate variance is

Answer 1

The direct labor rate variance is $2,125 unfavorable.

The direct labor rate variance measures the difference between the actual hourly labor rate paid to workers and the standard or budgeted rate. It helps assess whether labor costs were higher or lower than expected.

The formula for the direct labor rate variance is: (Standard rate per hour – Actual rate per hour) * Actual hours used

The direct labor rate variance is:

= ($5.50 - $5.75) * 8,500 hours

= (-$0.25) * 8,500 hours

= $2,125 unfavorable.