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Multiple Choice QuestionABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct labor rate variance.Multiple choice question.$10,000 F$14,400 U$10,000 U$14,400 F

Question

Multiple Choice QuestionABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ 1.00perpound;Directlabor:1hour@1.00 per pound; Direct labor: 1 hour @ 10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of 17,280;Directlabor:36,000hoursatatotalcostof17,280; Direct labor: 36,000 hours at a total cost of 374,400. Compute the direct labor rate variance.Multiple choice question.10,000F10,000 F14,400 U10,000U10,000 U14,400 F

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Solution

The direct labor rate variance is calculated as follows:

First, calculate the standard cost per hour of direct labor, which is given as $10.00.

Next, calculate the actual cost per hour of direct labor. This is done by dividing the total actual cost of direct labor (374,400)bythetotalactualhoursofdirectlabor(36,000hours).Thisgivesanactualcostperhourof374,400) by the total actual hours of direct labor (36,000 hours). This gives an actual cost per hour of 10.40.

The labor rate variance is then calculated by subtracting the standard cost per hour from the actual cost per hour, and then multiplying by the total actual hours of direct labor.

So, the calculation is as follows:

(10.40−10.40 - 10.00) * 36,000 = $14,400 Unfavorable.

Therefore, the correct answer is $14,400 U.

This problem has been solved

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ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct labor rate variance.Multiple choice question.$14,400 U$10,000 F$10,000 U$14,400 F

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