Question

Lucky Company's direct labor information for the month of February is as follows: Actual direct labor hours worked (AQ) 67,500 Standard direct labor hours allowed (SQ) 72,000 Total payroll for direct labor $ 1,080,000 Direct labor efficiency variance $ 66,600 The direct labor rate variance for February (rounded to the nearest dollar) was:

Answer 1

Direct labor rate variance= $81,000 unfavorable

Step-by-step explanation:

Giving the following information:

Actual direct labor hours worked (AQ) 67,500

Standard direct labor hours allowed (SQ) 72,000

Total payroll for direct labor $ 1,080,000

Direct labor efficiency variance $ 66,600

First, we need to calculate the standard rate per hour:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

66,600 = (72,000 - 67,500)*standard rate

66,600 / 4,500= standard rate

$14.8 = standard rate

To calculate the direct labor rate variance, we need to use the following formula:

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Actual rate= 1,080,000 / 67,500= $16

Direct labor rate variance= (14.8 - 16)*67,500

Direct labor rate variance= $81,000 unfavorable