Question

The following data relate to direct labor costs for August: actual costs for 5,500 hours at $24.00 per hour and standard costs for 5,000 hours at $23.70 per hour. The direct labor rate variance is a.$1,500 unfavorable b.$1,500 favorable c.$1,650 unfavorable d.$1,650 favorable

Answer 1

Answer: c. $1,650 unfavorable

Explanation:

The direct labor rate variance shows the difference between the cost of direct labor that the company thought it would incur vs what it actually incurs for the period.

Formula is:

Direct labor rate variance = Actual cost of direct labor - Standard cost of actual hours of direct labor

= Actual hours * (Actual cost - Standard cost)

= 5,500 * (24 - 23.70)

= $1,650 unfavorable

Unfavorable because the actual cost incurred was more than the cost anticipated.