Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period. Direct labor standard (4 hours @ $12/hour) $ 48 per unitActual hours worked 12,250 Actual rate per hour $ 12.50 Multiple Choice$21,000 favorable.$6,125 unfavorable.$7,000 unfavorable.$14,875 favorable.$7,000 favorable.
Question
Use the following data to find the direct labor rate variance if the company produced 3,500 units during the period. Direct labor standard (4 hours @ 48 per unitActual hours worked 12,250 Actual rate per hour 21,000 favorable.7,000 unfavorable.7,000 favorable.
Solution
The direct labor rate variance can be calculated using the following formula:
Direct Labor Rate Variance = (Actual Hourly Rate - Standard Hourly Rate) * Actual Hours Worked
From the data given, we know that:
- The standard hourly rate is $12
- The actual hourly rate is $12.50
- The actual hours worked is 12,250
Substituting these values into the formula, we get:
Direct Labor Rate Variance = (12) * 12,250 = 6,125
Since the actual rate is higher than the standard rate, this is unfavorable. So, the direct labor rate variance is $6,125 unfavorable.
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