Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August?
A) $972 Favorable
B) $1,188 Unfavorable
C) $2,160 Favorable
D) $2,808 Unfavorable

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. The actual hourly rate is $48,708 / 6,600 hours = $7.38. The standard rate is $7.20. Thus, the variance is ($7.38 - $7.20) x 6,600 = $0.18 x 6,600 = $1,188 Unfavorable.

Zanny Electronics Corporation Uses a Standard Cost System for the Production