Question

When auto manufacturer BMW purchased the Rolls-Royce brand name, BMW had to hire and train a new staff of assembly workers. The new workers were paid $25 per hour, worked a total of 7,500 hours, and produced 2,000 cars. BMW budgeted for a standard labor rate of $27 per hour and 1.25 direct labor hours per car. What is the direct labor rate variance for the Rolls-Royce division?A) $4,000 favorableB) $15,000 favorableC) $4,000 unfavorableD) $15,000 unfavorable

Answer 1

Answer:

B) $15,000 favorable

Explanation:

The computation of the direct labor rate variance is shown below:

Direct labor rate variance = Actual hours × (Standard rate - actual rate)

                                           = 7,500 hours × ($27 per hour - $25 per hour)

                                           = 7.500 hours × $2 per hour

                                           = $15,000 favorable

The other things which are mentioned in the question are not relevant. Hence, ignored that part.