In: Accounting
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
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. | ||