Question

The following data relate to product no. 33 of La Quinta Corporation: Direct labor standard: 5 hours at $14 per hour Direct labor used in production: 45,000 hours at a cost of $639,000 Manufacturing activity: 8,900 units completed The direct-labor rate/price variance is:

Answer 1

Answer:

$9,000 (Unfavorable)

Explanation:

The computation of the direct-labor rate/price variance is given below:

Given that

Actual time used = 45,000 hours

Actual cost of labor used = $639,000

Now  

Actual rate = Actual cost of labor used ÷ Actual time used

= $639,000 ÷ 45,000

= $14.2 per hour

And,

Standard rate = $14 per hour

Standard time = 5 hours per unit

Actual output = 8,900 units

So, standard time for actual output = 8,900 × 5

= 44,500

Now

Direct labor rate variance = Actual time × (Standard rate - Actual rate)

= 45,000 × (14 - 14.2)

= $9,000 (Unfavorable)