The standard costs and actual costs for direct materials, direct labor, and fact

Question

The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:

Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12

Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity = 10,000 hrs.):

Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $.80 per hour
Total fixed cost, $8,000

The amount of the direct labor rate variance is
a. $4,400 unfavorable
b. $4,500 favorable
c. $4,400 favorable
d. $4,500 unfavorable

Explanation / Answer

Labor rate variance = AH(AR-SR) = 7,400(11.40 - 12) = 4440 favorable Answer: C

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