Talladega Industries, Inc., (TII) developed the following standard costs for direct material and direct labor for one of their major products, the 10-gallon plastic container.

During August, TII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct labor hours at an average wage of $15.25 per hour.
-August's direct labor rate variance was:
A)$125 unfavorable.
B)$125 favorable.
C)$142,375 favorable.
D)None of the above is correct.

Question

Talladega Industries, Inc., (TII) developed the following standard costs for direct material and direct labor for one of their major products, the 10-gallon plastic container.
  
During August, TII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct labor hours at an average wage of $15.25 per hour.
-August's direct labor rate variance was:
A)$125 unfavorable. 
B)$125 favorable. 
C)$142,375 favorable. 
D)None of the above is correct.

Quizplus · Accepted Answer

A)(AR - SR)× AH = ($15.25 - $15.00)× 500 = $125 U