Hobart Company manufactures patio umbrellas.The direct labor standard for each umbrella is 1.25 direct labor hours at a standard rate of $12.00 per hour.During June, Hobart used 36,000 direct labor hours to produce 30,000 umbrellas.Hobart's direct labor payroll totaled $428,400.What is Hobart's direct labor rate variance for November?
A)$3,600 unfavorable
B)$3,600 favorable
C)$18,000 favorable
D)$18,000 unfavorable

Question

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. The actual hourly rate is $428,400 / 36,000 hours = $11.90. The standard rate is $12.00. Therefore, the variance is ($11.90 - $12.00) x 36,000 = -$0.10 x 36,000 = -$3,600, which is favorable because the actual rate is less than the standard rate.

Hobart Company Manufactures Patio Umbrellas