Question

StuckinMyHouse book company is a boutique shop that produces a small selection of adult coloring books. The first quarter 2020 Master Budget was based on selling 1,200 units, with a direct labor cost of $3,600. The company experienced an unexpected surge in purchases, actually selling 2,300 coloring books. It spent $6,640 on direct labor. The one employee earned $10 per hour, as expected.

How much is the rate variance (aka efficiency variance) for direct labor?

Answer 1

Labour rate variance = $260 favourable

Step-by-step explanation:

The rate variance would be the difference between the standard labour cost of the 2,300 units sold and the actual labour cost

Standard labour cost (3600/1200× 2300) 6,900

Actual labour cost 6, 640

labour rate variance $260 favourable

The variance is favourable because the StuckinMyHouse book company saved $260 as a result of of his actual cost been less than the expected cost.