Question

The following data are given for Harry Company:

Budgeted production 1,094 units
Actual production 975 units
Materials:
Standard price per ounce $1.777
Standard ounces per completed unit 12
Actual ounces purchased and used in
production 12,051
Actual price paid for materials $24,705
Labor:
Standard hourly labor rate $14.71 per hour
Standard hours allowed per completed
unit 4.7
Actual labor hours worked 5,021
Actual total labor costs $81,591
Overhead:
Actual and budgeted fixed overhead $1,141,000
Standard variable overhead rate $26.00 per standard labor hour
Actual variable overhead costs $140,588
Overhead is applied on standard labor hours.
Determine the direct labor rate variance.
a. $5,980 F
b. $20,937 F
c. $20,937 U
d. $5,980 U

Answer 1

$7,732 unfavorable

Step-by-step explanation:

The computation of the direct labor rate variance is shown below:

Direct labor rate variance = Actual time taken × (Standard rate - actual rate)

= 5,021 labor hours × ($14.71 - $81,591 ÷ 5,021 labor hours)

= 5,021 labor hours × ($14.71 - $16.25)

= $7,732 unfavorable

Since the actual rate is more than the standard rate so it would be lead to unfavorable variance

This is the answer but the same is not provided in the given options