Question

Accurate Tax Returns budgets two direct labor hours for every tax return that it​ prepares, at a standard cost of​ $34 an hour. During the most recent​ year, 540 returns were completed with the labor cost totaling​ $26,000. The actual labor cost was​ $48.15 per hour during that period. The actual number of labor hours was​ 1,000. What is the direct labor cost​ variance?

Answer 1

Answer:

$14,500 unfavorable variance

Explanation:

the direct labor cost variance is calculated with the following formula:

direct labor variance = total actual labor hours x (actual labor cost per hour - standard cost per hour)

direct labor variance = 1,000 hours x ($48.15 - $34) = $14,500 unfavorable variance

The variance is unfavorable because the actual labor cost is much higher than the estimated labor cost.