Question

Use the following data to find the total direct labor cost variance if the company produced 3,500 units during the period.

Direct labor standard (4.00 hrs. @ $6.70/hr.)	$	26.80	per unit
Actual hours worked		12,300
Actual rate per hour	$	7.30

Multiple Choice

• $12,300 favorable.

• $8,400 favorable.

• $4,010 unfavorable.

• $8,400 unfavorable.

• $4,010 favorable.

Answer 1

Total Direct Labor Cost Variance

Actual Hours (AH) = 12,300 hours

Actual Rate (AR) = $7.30 per hour

Standard Hours (SH) = 14,000 hours [3,500 units x 4 hours per unit]

Standard Rate (SR) = $6.70 per hour

Total Direct Labor Cost Variance = [Actual Hours x Actual Rate] – [Standard Hours x Standard Rate]

= [AH x AR] – [SH x SR]

= [12,300 hours x $7.30 per hour] – [14,000 hours x $6.70 per hour]

= $89,790 - $93,800

= -$4,010

= $4,010 F [Favorable]

“Here, the Total Direct Labor Cost Variance is negative $4,010, therefore, the Total Direct Labor Cost Variance will be $4,010 F [Favorable].