Question

Wholesome Burger, Inc. budgeted 25,000 direct labor hours for producing 100,000 units. The standard direct labor rate is $6 per hour. During March, the company used 30,000 hours for producing 80,000 units and paid $6.25 per hour. Calculate the direct labor rate variance.

Answer 1

See below

Step-by-step explanation:

Given the above information, we will apply the formula below to compute direct labor rate variance.

Direct labor rate variance =

(SR - AR) × AH

Stanadard (Rate) SR = $6

Actual Hour (AR) = $6.25

Actual Hour (AH) = 30,000

Then,

Direct labor rate variance

= ($6 - $6.25) × 30,000

= -$0.25 × 30,000

= -$7,500

= $30,000 Unfavorable

It is unfavourable because the actual rate is more than the budgeted rate.