Question

The following data relate to direct labor costs for the current period: Standard costs 6,000 hours at $12.00 Actual costs 7,500 hours at $11.60 What is the direct labor rate variance?

A. $15,000 unfavorable
B. $3,000 favorable
C. $17,400 unfavorable
D. $2,400 favorable

Answer 1

A. 15,000 unfavorable

The standard costs suggest that direct labor should be 72,000 (6,000 hours at 12.00/hour) equals 72,000. The actual costs are 87,000 (7,500 hours at 11.60/hour). The difference between the two is 15,000, and because the actual is higher than the standard, the variance is considered unfavorable because the firm has to pay more than the standard.

Answer 2

Answer: $3000 favorable

Step-by-step explanation:

The information provided in the question are:Standard costs 6,000 hours at $12.00 and the Actual costs 7,500 hours at $11.60.

The direct labor rate variance will be calculated as:

= (7,500 × $ 12) - (7,500 × $11.60)

= $90,000 - $87,000

= $3,000 Favorable

It is favorable since the standard rate is more than the actual rate.