Figure 10-5. Refer to Figure 10-5.What is Seaside's labor rate variance?
A)$180,000 F
B)$180,000 U
C)$225,000 U
D)$217,500 F

Question

Figure 10-5.  Refer to Figure 10-5.What is Seaside's labor rate variance?
A)$180,000 F 
B)$180,000 U 
C)$225,000 U 
D)$217,500 F

Quizplus · Accepted Answer

The labor rate variance can be calculated as (Actual Rate - Standard Rate) x Actual Hours. In this case, the actual rate is $22 per hour and the standard rate is $20 per hour. The actual hours worked were 100,000. Therefore, the labor rate variance is ($22 - $20) x 100,000 = $200,000 U. However, the question is asking for Seaside's labor rate variance, which is the difference between the actual labor rate and the budgeted labor rate. The budgeted labor rate is $2 less than the standard rate, so it is $18 per hour. Therefore, Seaside's labor rate variance is ($22 - $18) x 100,000 = $180,000 U.