Question

Use the following data to find the total direct labor cost variance if the company produced...

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.

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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].

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