Question

Discover Motor Company uses a standard cost system to collect costs related to the production of its toothpick motors. The direct labor standard for each toothpick motor is 1.25 hours at a standard cost of $9.50 per hour. During the month of May, Discover's toothpick motor production used 5,900 direct labor hours at a total direct labor cost of $54,575. This resulted in production of 4,800 toothpick motors for May. What is Discover's labor rate variance for the month of May?

Answer 1

$1,475 Favorable

Step-by-step explanation:

The computation of labor rate variance is shown below:-

For computing the labor rate variance first we need to compute the Actual rate Per Hour

= Total Cost ÷ Actual Hours

= $54,575 ÷ 5,900

= $9.25

Now,

Labor Rate Variance = (Standard Rate - Actual Rate) × Actual Hours

= ($9.50 - $9.25) × 5,900

= $0.25 × 5,900

= $1,475 Favorable

So, for computing the labor rate variance we simply applied the above formula.