Asked by Hannah Baranda on May 06, 2024
Verified
The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month:
What is the labor rate variance for the month?
A) $450 Favorable
B) $3,915 Favorable
C) $3,915 Unfavorable
D) $450 Unfavorable
Labor Rate Variance
The difference between the actual labor cost incurred and the labor cost that was expected or budgeted, typically due to wage rate differences.
Labor Standards
Benchmarks for the amount of labor time required to perform specific tasks, used for budgeting, scheduling, and performance evaluation.
Last Month Data
Information or statistics pertaining to the previous month, often used in analysis and decision-making processes.
- Investigate and quantify variations in direct labor, including those related to rate and efficiency.
Verified Answer
Actual rate paid per hour = Total labor cost for the month / Total hours of labor for the month
= ($21,450 + $2,850) / (2,100 + 300)
= $24 / hour
Standard rate per hour = $22 / hour (given in the labor standards)
So, labor rate variance = (Actual rate - Standard rate) x Actual hours
= ($24 - $22) x 2,100
= $4,200 unfavorable
Therefore, the correct answer is C, $3,915 Unfavorable (rounded to the nearest dollar).
Learning Objectives
- Investigate and quantify variations in direct labor, including those related to rate and efficiency.
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