The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows:
Standard Costs
Direct labor 7,500 hours @ $12.00
Actual Costs
Direct labor 7,400 hours @ $11.40
The amount of the direct labor rate variance is:
Answer
A.$4,440 unfavorable
B.$4,500 favorable
C.$4,440 favorable
D.$4,500 unfavorable
To find the direct labor rate variance, we need to compare the standard cost of direct labor with the actual cost of direct labor.
Standard Cost of Direct Labor = Standard Rate * Actual Hours
= $12.00 * 7,500 hours
= $90,000
Actual Cost of Direct Labor = Actual Rate * Actual Hours
= $11.40 * 7,400 hours
= $84,360
Direct Labor Rate Variance = Standard Cost of Direct Labor - Actual Cost of Direct Labor
= $90,000 - $84,360
= $5,640
Now that we have calculated the direct labor rate variance, we can determine if it is favorable or unfavorable.
If the variance is positive (favorable), it means that the actual cost is lower than the standard cost. If the variance is negative (unfavorable), it means that the actual cost is higher than the standard cost.
In this case, the direct labor rate variance is $5,640. Since the actual cost is lower than the standard cost, the variance is favorable.
Therefore, the correct answer is:
B. $4,500 favorable