Question

In: Accounting

The following data are given for Harry Company: Budgeted production 1,056 units Actual production   900 units...

The following data are given for Harry Company:

Budgeted production 1,056 units
Actual production   900 units
Materials:
    Standard price per ounce $1.758
    Standard ounces per completed unit 11
    Actual ounces purchased and used in production 10,197
    Actual price paid for materials $20,904
Labor:
    Standard hourly labor rate $14.09 per hour
    Standard hours allowed per completed unit 4.4
    Actual labor hours worked 4,635
    Actual total labor costs $75,319
Overhead:
    Actual and budgeted fixed overhead $1,054,000
    Standard variable overhead rate $24.00 per standard labor hour
    Actual variable overhead costs $129,780
Overhead is applied on standard labor hours. (Round interim calculations to the nearest cent.)

The direct labor rate variance is

a.$19,522.60 favorable

b.$19,522.60 unfavorable

c.$10,011.60 unfavorable

d.$10,011.60 favorable

Solutions

Expert Solution

Ans. Option C $10,011.60 unfavorable
*First of all, we need to calculate the actual labor rate for further calculations.
*Actual rate   = Actual labor cost / Actual hours
$75,319 / 4,635
$16.25 per direct labor hour
*Now we can calculate the direct labor rate variance.
Direct Labor Rate variance = (Standard rate - Actual rate) * Actual hours
($14.09 - $16.25) * 4,635
-$2.16 * 4,635
-$10,011.60 or   $10,011.60 unfavorable
*The standard labor rate is lower than the actual so the variance is unfavorable.

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