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:
A.$4,440 unfavorable
B.$4,500 favorable
C.$4,440 favorable
D.$4,500 unfavorable
To calculate the direct labor rate variance, we need to compare the actual cost per hour with the standard cost per hour.
The standard cost per hour is given as $12.00.
The actual cost per hour is given as $11.40.
To calculate the direct labor rate variance, use the formula:
Direct Labor Rate Variance = (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate)
Here,
Actual Hours = 7,400 hours
Actual Rate = $11.40
Standard Rate = $12.00
Plugging in the values, we get:
Direct Labor Rate Variance = (7,400 x $11.40) - (7,400 x $12.00)
Calculating this gives us:
Direct Labor Rate Variance = $84,360 - $88,800
Direct Labor Rate Variance = -$4,440
Since the result is negative, it means the variance is unfavorable.
Therefore, the correct answer is A. $4,440 unfavorable.