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Given the following information, calculate the direct labor price variance.  Actual production in units17,000Standard labor cost per unit1/2 hour @ $20 per hourActual cost for labor$216,750 for 12,750 hoursMultiple choice question.$72,750 unfavorable$38,250 unfavorable$72,750 favorable$38,250 favorable

Question

Given the following information, calculate the direct labor price variance.  Actual production in units17,000Standard labor cost per unit1/2 hour @ 20perhourActualcostforlabor20 per hourActual cost for labor216,750 for 12,750 hoursMultiple choice question.72,750unfavorable72,750 unfavorable38,250 unfavorable72,750favorable72,750 favorable38,250 favorable

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Solution

To calculate the direct labor price variance, we need to follow these steps:

  1. Calculate the Standard Cost per Hour: The standard labor cost per unit is 1/2 hour at 20perhour.So,thestandardcostperhouris20 per hour. So, the standard cost per hour is 20.

  2. Calculate the Actual Cost per Hour: The actual cost for labor is 216,750for12,750hours.So,theactualcostperhouris216,750 for 12,750 hours. So, the actual cost per hour is 216,750 / 12,750 hours = $17 per hour.

  3. Calculate the Direct Labor Price Variance: The formula for the direct labor price variance is (Standard Cost per Hour - Actual Cost per Hour) * Actual Hours. So, the direct labor price variance is (20−20 - 17) * 12,750 hours = $38,250.

  4. Determine if the Variance is Favorable or Unfavorable: If the actual cost per hour is less than the standard cost per hour, the variance is favorable. If the actual cost per hour is more than the standard cost per hour, the variance is unfavorable. In this case, the actual cost per hour is less than the standard cost per hour, so the variance is favorable.

So, the answer is $38,250 favorable.

This problem has been solved

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