Question

A job was budgeted to require 4 hours of labor per unit at $11.00 per hour. The job consisted of 7,000 units and was completed in 24,000 hours at a total labor cost of $312,900. What is the direct labor rate variance?

Answer 1

Answer:

$48,900 Adverse

Explanation:

The direct labor rate variance seeks to establish the difference in the wage rate that was budgeted for and the one actually incurred on the quantities used.

direct labor rate variance = Aq × Ap - Aq × Sp

                                          = (24,000 hrs × $13.04) - (24,000 hrs  × $11.00)

                                          = $312,900 - $264,000

                                          = $48,900 Adverse